The quarter-point reduction brings the Bank’s overnight target rate to 4.50%, now 50 bps below its peak of 5.00%.

In his opening statement following the announcement, Governor Tiff Macklem hinted that more could be forthcoming as long as inflation continues to move in the right direction.

“If inflation continues to ease broadly in line with our forecast, it is reasonable to expect further cuts in our policy interest rate,” he said. “The timing will depend on how we see these opposing forces playing out. In other words, we will be taking our monetary policy decisions one at a time.”

While the Bank notes that price pressures are continuing to ease, it drew attention to “some important parts of the economy—notably shelter and some other services,” that are “holding inflation up.”

In addition to announcing the rate cut, the Bank of Canada also released updated economic forecasts, projecting moderately slower GDP growth in 2024 than previously anticipated.

TODAY’S HIGHLIGHTS

• New benchmark rate 4.5 (down from 5.0 in May)
• Expected lender prime rate 6.70%
• 5 year bond yield 3.27 (down 2.0) this effects 5 year fixed mortgage rates expected to decrease
• Updated GDP forecasts: 
• 1.2% in 2024 (vs. 1.5% previously)
• 2.1% in 2025 (vs. 2.2)
• 2.4% in 2026 (vs. 1.9%)
• Updated inflation forecasts:
• 2.6% in 2024 (no change)
• 2.4% in 2025 (vs. 2.2%)
• 2.0% in 2026 (vs. 2.1%)