The Bank of Canada reduced its benchmark interest rate by 0.25% to 4.5% on Wednesday, aiming to boost the economy as inflation cools. This decision was anticipated by economists due to signs of economic weakness. Bank of Canada Governor Tiff Macklem stated that inflation is expected to continue decreasing, with potential for further rate cuts if economic data supports it.
Macklem emphasized that future rate decisions will be based on current economic conditions, suggesting the possibility of more cuts, but noted that the bank is not on a fixed path. Economists from CIBC and BMO predict additional cuts in the coming months, contingent on inflation and job market data.
Economists anticipate that the policy rate could drop to 4.0% by October if current trends persist. Money markets predict another 25-basis-point cut this year, with a 53% chance of a rate reduction in the next decision on September 4.
The Bank of Canada remains flexible in its approach, closely monitoring economic indicators to determine future rate adjustments, aiming to stabilize and rejuvenate the economy
