Bank of Canada cuts interest rates to 4.5%

The Bank of Canada has once again slashed interest rates, marking the second consecutive cut as inflation fears ease. Led by Governor Tiff Macklem, policymakers reduced the overnight rate to 4.5%, aligning with market expectations. The move aims to bolster sluggish economic growth and ensure inflation remains under control.

Following the announcement, bond prices surged, pushing yields to their lowest since May 2023. The Canadian dollar also weakened in response to the rate cut, reflecting market reactions to the bank's dovish stance on inflation.

Macklem emphasized the bank's cautious approach, stating further rate cuts are likely but will be decided on a meeting-by-meeting basis. The bank is confident in its progress towards achieving its 2% inflation target, citing recent data showing a slowdown in price pressures.

Economists and market analysts now anticipate continued easing from the Bank of Canada throughout the year, with expectations that the overnight rate could reach 3.75% by December 2024. This accommodative policy stance is aimed at supporting a soft landing for the economy amid evolving global economic conditions.

In its latest policy statement, the bank highlighted ongoing challenges such as weaker-than-expected household spending and signs of slack in the labor market. Despite these concerns, the bank expects economic growth to rebound, driven by increased exports and moderated inflation expectations.

Looking ahead, the Bank of Canada's strategy underscores its commitment to navigating economic uncertainties while maintaining price stability. As global central banks also adjust their policies, the bank remains vigilant in balancing growth objectives with inflation control, shaping its decisions to safeguard economic stability in Canada.