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Interest rate cuts from Canada’s central bank could be on tap in the new year, assuming forthcoming data support such a move.

While the Bank of Canada (BoC) is largely expected to hold its key rate at 1.75% on Dec. 4, Canadian Imperial Bank of Commerce (CIBC) anticipates a quarter-point cut in the first quarter of 2020. Bank of Nova Scotia does one better, calling for two rate cuts in 2020, one in each of in the first and second quarter.

CIBC says the accuracy of its forecast depends on forthcoming evidence of economic weakness, specifically in the next two employment reports.

“The jobs data has been the most important pleasant surprise in the past year, and it’s understandable that without any meaningful climb in the unemployment rate, the central bank would have doubts about the need for an ease,” stated Avery Shenfeld, managing director and chief economist at CIBC Capital Markets, in a report on Friday.

Canada’s most recent jobs report indicates weakness, after accounting for the 20,000 temporary jobs at polling stations for the federal election, Shenfeld noted. “We need two more of these to look like a trend,” he said.

Evidence of downside risk to the central bank’s growth forecast would also be required to support CIBC’s forecast. For example, global PMIs (purchasing managers’ indexes) have been weak, which could “cast doubt” on the BoC’s current view that “the picture abroad is turning,” Shenfeld said.

Alternatively, evidence in support of monetary policy easing could come in the form of a strengthening loonie, which would create fears about export competitiveness.

“Our research showed that Canada has been steadily losing share of U.S. imports to other countries, including those with softer currencies,” Shenfeld said.

Loonie strength was also cited by Scotiabank as a factor in potential easing of monetary policy.

“If the Fed cuts again into 2020 as we forecast, then staying parked at 1.75% on the BoC’s overnight rate risks driving currency appreciation,” said Derek Holt, vice-president and head of capital markets economics at Scotiabank Economics, in a report on Thursday.

The result of loonie strength would be a further deterioration in export competitiveness, and “it’s doubtful the BoC would welcome such a development,” Holt said.

In addition to that concern, Holt’s outlook is based on several factors, including slack in the Canadian economy that could rise and subsequently put downward pressure on inflation, and the demonstrated lack of success by fiscal stimulus — expected by the newly re-elected federal Liberal government — to sustainably boost the economy.

For full details, read the reports from CIBC and Scotiabank.