The Bank of Canada cut rates again. Here’s why, and what’s next

globalnews.ca:

The Bank of Canada lowered its key interest rate by 25 basis points on Wednesday and opened the door to bigger cuts if the economy slows more sharply in the months ahead.

The third consecutive rate cut was widely expected by economists and brings the central bank’s benchmark interest rate to 4.25 per cent.

Wednesday’s decision marks the first time since the global financial crisis in 2009 that the Bank of Canada has cut rates at three meetings in a row.

The policy rate, which widely sets the cost of borrowing across Canada and informs the rates many Canadians get on mortgages and other loans, has fallen 75 basis points since the easing cycle began in June.

“If inflation continues to ease broadly in line with our July forecast, it is reasonable to expect further cuts in our policy rate,” Bank of Canada governor Tiff Macklem told reporters Wednesday.

“We will continue to assess the opposing forces on inflation, and take our monetary policy decisions one at a time.”

Asked Wednesday whether the central bank debated a steeper cut of half a percentage point, Macklem did not answer directly, but he did not rule out a change of pace moving forward.

“We did discuss some different scenarios. Scenarios where it might be appropriate to slow the decline in interest rates… and where it might be appropriate to cut by 50 basis points,” he said.

Macklem explained that if the economy proves stronger than anticipated and inflation more stubborn, the Bank may pause its easing cycle at a future decision. But he added that if the economy “was significantly weaker … yes, it could be appropriate to take a bigger step, something bigger than 25 basis points.”

Randall Bartlett, senior director of Canadian economics at Desjardins, told Global News