Bank of Canada Slashes Rates For 4th Straight Month In Biggest Rate Cut Since Covid

The Bank of Canada has cut its benchmark overnight rate to 3.75%, the largest reduction in borrowing costs since March 2020, signaling that the post-pandemic era of high inflation is over. This move is part of the central bank's efforts to boost economic growth and keep inflation close to its 2% target. The bank's preferred measures of core inflation are now below 2%, and business and consumer inflation expectations have largely normalized. GDP growth is forecast to strengthen gradually over the projection horizon, supported by lower interest rates. The bank expects growth in residential investment to rise as strong demand for housing lifts sales and spending on renovations. The Bank of Canada's governor, Tiff Macklem, stated that the focus is now on maintaining low, stable inflation and avoiding slowing the economy too much. The bank sees upward and downward risks to its inflation projection as reasonably balanced, and policymakers expect to reduce the policy rate further if the economy evolves in line with their expectations. The next rate decision is on December 11, with some economists projecting another 50-basis-point cut. The market reaction was muted, with the USDCAD virtually unchanged, as the decision and commentary were largely expected.