The Bank of Canada has reduced its policy interest rate, marking the first cut since March. This decision aligns with market expectations and the predictions of numerous economists. The move comes as Canada faces concerns about weak economic growth and a challenging job market outlook. Many analysts believe that further rate cuts are likely on the horizon as the central bank navigates these economic headwinds.
According to Corpay’s chief market strategist Karl Schamotta, Governor Tiff Macklem stated a clear consensus among the governing council supported the cut, signaling a broad reduction in inflation fears. Economists are now weighing in on the potential future path of monetary policy.
Doug Porter, chief economist at the Bank of Montreal, anticipates further easing. “The BOC left its options wide open on the next meeting, maintaining a focus on a shorter-term horizon than usual to determine the path for policy. For now, we will stick to our call that the Bank will cut two more times in coming months.” Similarly, Katherine Judge, senior economist at CIBC, expects another 25 basis-point cut in October, citing the economy’s declining resilience and well-contained inflation.
However, not all analysts foresee an extended cutting cycle. Tony Stillo and Michael Davenport of Oxford Economics predict the BOC will pause after another 25 bps cut in October, holding rates at 2.25 per cent through 2026. This level represents the lower end of their neutral range estimate, suggesting a more cautious approach to further monetary easing.
