Key Takeaways
- Bank of Canada cut its policy rate to 4.25%, the third consecutive cut.
- GDP growth slowed, with unemployment rising to 6.4%.
- Economists expect more rate cuts, potentially into 2025.
The Bank of Canada reduced its policy interest rate by 25 basis points to 4.25% on Wednesday, marking its third consecutive cut.
This move, the first three-in-a-row cut since the 2009 global financial crisis, reflects growing concerns about the economy’s weakness.
More cuts
Governor Tiff Macklem suggested additional rate cuts are likely if inflation continues to ease, stating:
It is reasonable to expect further cuts in our policy rate.
Canada’s economy
Canada’s economy grew by 2.1% in the second quarter, but June and July saw flat GDP numbers, while unemployment climbed to 6.4%.
Headline inflation slowed to 2.5% in July, with shelter inflation remaining high but showing signs of easing.
RBC
RBC economist Claire Fan predicts that the Bank of Canada will cut rates again in October, citing weaker-than-expected economic growth.
David Rosenberg, founder of Rosenberg Research, also expects continued rate cuts due to Canada’s “shaky” economic foundation.
Macklem did not rule out a more significant rate cut if necessary, saying the bank is prepared to take a “bigger step” should the situation demand it.
