In a new research report, National Bank Financial Inc. indicates that it still expects the Bank of Canada to cut rates next year, but the brokerage firm now expects the cuts to come sooner.

“Our economic scenario has not materially changed since our last issue; we accordingly continue to think the Bank of Canada will ease in 2007 by 100 basis points compared to the Fed’s 200,” it says. “However, the first cut could come sooner in Canada than we forecasted last month,” it noted.

It now calls for a 25 bps cut by the Bank in the first quarter or next year, followed by 50 bps in cuts in the second quarter, and a final 25 bps cut in the third quarter. After that, rates are predicted to hold at 3.25% into 2008.

It also sees the Fed ending 2007 at 3.25%, after 200 bps in cuts next year; and dropping another 25 bps in the first quarter of 2008 to an even 3%.