Monday Market Minute | May 27, 2024

The June cut is all but confirmed — markets prepare for the pivot

What Moved

May CPI came in at 2.7%, consistent with the disinflation trend the BoC had been waiting for. Combined with softening labour market data and below-potential GDP growth, the case for a June 5 rate cut was overwhelming. Bond markets priced the cut at 95% probability. Governor Macklem's recent commentary had left little room for a surprise hold.

Why It Matters

The eve of the cutting cycle was a pivotal moment for private market positioning. Private credit returns would begin their gradual compression. PE deal flow, constrained by expensive financing, was about to accelerate. Housing — already warming — would receive a rate-cut catalyst. Every major private market asset class was about to reprice around a new rate trajectory.

Signal to Watch

The magnitude mattered as much as the direction. A 25bp cut would signal measured easing; any forward guidance suggesting a faster pace would amplify the repricing across private markets. Watch Macklem's press conference for clues about the July decision.

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