Bank of Canada cuts interest rate to 4.25%, signals more easing to come

financialpost.com:

The Bank of Canada cut its interest rate for the third consecutive time on Wednesday.

The central bank reduced its policy rate by 25 basis points to 4.25 per cent. The last time it cut three times in a row, barring the pandemic, was during the first quarter of 2009, during the global financial crisis.

“If inflation continues to ease broadly in line with our July forecast, it is reasonable to expect further cuts in our policy rate,” said Bank of Canada Governor Tiff Macklem, during prepared remarks in Ottawa. “We will continue to assess the opposing forces on inflation, and take our monetary policy decisions one at a time.”

Those opposing forces include the risk of the economy weakening further. Canada’s gross domestic product beat the bank’s own forecast with 2.1 per cent growth in the second quarter, but GDP in June and an early estimate for July were flat. The unemployment rate has climbed to 6.4 per cent and hiring remains soft.

“As inflation gets closer to target, we want to see economic growth pick up to absorb the slack in the economy so inflation returns sustainably to the two per cent target,” Macklem said.

Headline inflation slowed to 2.5 per cent in July and measures of core inflation, the preferred measures the bank looks at when making its policy decisions, have averaged around the same. The bank says shelter inflation, which is affected by higher interest rates, remains the largest contributor.

Economists are predicting the Bank of Canada will continue cutting its interest rate for the remainder of the year and into 2025, with the rate falling between 2.25 and 3.25 per cent by the end of next year.