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BOC Cuts Rates 50BPs, More Reductions Could Be Expected

BOC
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  • Bank of Canada cut interest rates for a fourth time in a row, by 50bps to 3.75% in line with economist and market expectations. Prior three cuts were 25bps and BoC says it took a bigger step as inflation is now back to the 2% target and it wants to keep it close to target.  
  • "Now our focus is to maintain low, stable inflation. We need to stick the landing," Macklem says in press conference statement. 
  • BoC says further cuts are seen if the economy advances as expected, but it does not commit to any specific pace. 
  • In its Monetary Policy Report, BOC's growth forecast for 2024 and 2025 were largely unchanged from July MPR at 1.2% and 2.1% respectively. 
  • BoC also says inflation is expected to be around 2% in October after declining to 1.6% in September. CPI inflation forecast for 2024 is 2.5% from 2.6% in the last report. The 2025 inflation forecast is lower at 2.2% from 2.4% in July MPR assuming lower energy prices. Core inflation is expected to gradually decline to 2% by Q4 2026. 
  • In terms of the quarterly projections, Q3 GDP forecast lowered to 1.5% from 2.8% in the July report. First half GDP revised up. Q4 2024 inflation estimate down to 2.1% from 2.4% in the last report. 
  • Risks around inflation are reasonably balanced, BoC says. Downside risk from household spending and on the upside, a rebound in housing or wage growth. 
  • "The Bank forecasts inflation will remain close to the target over the projection horizon. The upward pressure from shelter and other services is expected to gradually diminish. With stronger demand, the downward pressure on inflation is also forecast to dissipate, keeping the upward and downward forces roughly balanced. If the economy evolves broadly in line with this forecast, we anticipate cutting our policy rate further to support demand and keep inflation on target," Macklem said. 
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  • Bank of Canada cut interest rates for a fourth time in a row, by 50bps to 3.75% in line with economist and market expectations. Prior three cuts were 25bps and BoC says it took a bigger step as inflation is now back to the 2% target and it wants to keep it close to target.  
  • "Now our focus is to maintain low, stable inflation. We need to stick the landing," Macklem says in press conference statement. 
  • BoC says further cuts are seen if the economy advances as expected, but it does not commit to any specific pace. 
  • In its Monetary Policy Report, BOC's growth forecast for 2024 and 2025 were largely unchanged from July MPR at 1.2% and 2.1% respectively. 
  • BoC also says inflation is expected to be around 2% in October after declining to 1.6% in September. CPI inflation forecast for 2024 is 2.5% from 2.6% in the last report. The 2025 inflation forecast is lower at 2.2% from 2.4% in July MPR assuming lower energy prices. Core inflation is expected to gradually decline to 2% by Q4 2026. 
  • In terms of the quarterly projections, Q3 GDP forecast lowered to 1.5% from 2.8% in the July report. First half GDP revised up. Q4 2024 inflation estimate down to 2.1% from 2.4% in the last report. 
  • Risks around inflation are reasonably balanced, BoC says. Downside risk from household spending and on the upside, a rebound in housing or wage growth. 
  • "The Bank forecasts inflation will remain close to the target over the projection horizon. The upward pressure from shelter and other services is expected to gradually diminish. With stronger demand, the downward pressure on inflation is also forecast to dissipate, keeping the upward and downward forces roughly balanced. If the economy evolves broadly in line with this forecast, we anticipate cutting our policy rate further to support demand and keep inflation on target," Macklem said.