The Bank of Canada may cut rates by, at most, another 50 basis points according to a report from Standard & Poor’s.

The ratings agency notes that there are three more policy announcement dates in the remainder of 2003, scheduled for September, October, and December. “If the economy performs in line with the bank’s base case scenario, the September and October announcement dates are the two most likely opportunities for any further interest rate cuts,” it says.

“The case for larger rate reductions of 50 basis points at a time is not very compelling because domestic demand has remained fairly buoyant, notwithstanding the headwinds facing the economy,” S&P says, Although, it allows, “Continued appreciation of the Canadian dollar could cause the bank to step up its easing program. After all, the July 15 rate cut was, in part, an attempt to slow the appreciation in the currency.”

For now, this latest cut seems to have done the job, S&P finds. “The July 15 rate cut effectively squelched expectations of widening interest rate differentials between Canada and the U.S. The Canadian dollar is down almost 6% from mid-June highs of US75.06¢, the highest in almost seven years, and with the U.S. Federal Reserve downplaying the need for additional rate cuts, there is little reason for the Bank of Canada to accelerate its rate cuts.”

“Adding it all up implies that the bank will be stingy in doling out additional rate cuts. Including the July 15 move, therefore, the bank might unwind 75 basis points at most of the previous 125 basis point tightening,” it concludes.