Canada: Bank of Canada cuts rates in September
Latest bank decision: At its meeting on 17 September, the Bank of Canada reduced the target for the overnight rate from 2.75% to 2.50%, following 225 basis points of rate cuts from mid-2024 to March 2025.
Weak economy and mild inflation drive move: The decision to ease monetary policy was driven on one hand by muted economic activity: GDP shrank in Q2, and employment fell for the second straight month in August. In addition, inflation has been well within the Bank’s 1.0–3.0% target range in recent months.
Rate cuts likely to continue: Most panelists see a further 25 basis-point cut later this year, though several don’t see rates falling any further from their current level.
Panelist insight: On the near-term outlook, Desjardins’ Randall Bartlett said:
“While the Bank worries about supply chain issues resulting from the trade war, it also notes the potential for a weaker job market to stifle domestic demand. The uncertain fate of the Canada-U.S. trade agreement ahead of its review, will likely limit prospects for a near-term investment rebound. As such, we remain of the view that the Bank will cut again in October.”