The chief economist at TD Bank (TSE:TD) has forecast a 25-basis point reduction in interest rates from the Bank of Canada when it next meets on October 23.
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Beata Caranci’s call goes against the grain as futures markets are pricing in a more aggressive 50-basis point rate cut from Canada’s central bank. Caranci’s new base rate would be 4%, while many other economists are calling for a 3.75% rate instead.
Economists and analysts expect a larger rate reduction from Canada’s central bank after the country’s annual inflation rate in September fell to 1.6%, which is below the Bank of Canada’s 2% annualized target.
Rationale for a Smaller Rate Cut
Caranci’s rationale for a smaller 25-basis point rate reduction is that the Bank of Canada has never sped up cutting rates in the middle of a monetary cycle unless a recession was in full-swing. She refers to the 2001 dot-com crisis as the last time such an event took place, and absent such an outlying factor, larger rate cuts are not called for, she said.
Separately, TD Bank announced that it is now extending liquidity to LTX, a corporate bond trading platform that’s supported by artificial intelligence (AI). With the measure, TD Bank can offer investors access to both high-yield and investment grade bond liquidity.
Is TD Bank a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:TD stock based on six Buys and six Holds assigned in the past three months, as indicated by the graphic below. After a 3.73% rally in its share price over the past year, the average TSE:TD price target of C$87.51 per share implies 11.54% upside potential.
