Institutional: Bank of Canada survey leaves room for 50 bps rate cut in October

BMO Capital Markets believes that the Bank of Canada's quarterly business outlook survey suggests that the job market will continue to weaken despite September's employment data showing a strong pickup in full-time and private sector jobs. Firms expect wage growth to slow over the next 12 months and hiring intentions are little changed from the previous quarter. The bank noted that the proportion of firms reporting labour shortages remained ‘well below’ historical averages, with firms citing an influx of immigrants as adding to labour supply. The bank said the survey results leave room for the Bank of Canada to cut interest rates by 50 basis points, although it is sticking to its expectation of a 25 basis point cut. Inflation data due out next week could help settle the 0.25 basis point vs. 0.5 basis point debate among Canadian economists.