On October 23, 2024, Expected to post the latest interest rate decision and new economic forecast today, the Bank of Canada is expected to announce the cut in interest rates-the first in more than a year-amid renewed speculation that the central bank is poised to pump life into slowing economic growth and declining inflation in the country.
Expected Rate Cuts
With inflation dipping to 1.6%-below the bank’s target of 2% -the economists widely predict a 50-basis point rate cut to boost economic activity. The cut would bring overnight down to 3.75%, marking a drastic shift in monetary policy to try to address softening growth.
Economic Challenges and Focus Areas
It has not been easy for the Bank of Canada to manage challenges in balancing interest rate hikes to curb inflation with supporting economic growth. A new quarterly economic forecast, also to be released today, will issue fresh projections on growth, inflation, and employment trends. Market participants eagerly await remarks from Governor Tiff Macklem on what may outline future rate decisions for the bank. Analysts say Wednesday’s move may signal more cuts as the central bank continues to look to boost consumer spending and business investment.
Market Reaction and Ramifications
Investors and financial markets eagerly await the decision since it is going to have a direct influence on mortgage rates, loans, and investment immediately.
A higher-than-expected rate cut can give rise to optimism, but simultaneously, it creates ruckus about underlying weakness in the economy.
Since the economic performance of Canada directly correlates to global trends, the rate decision will now determine the trend in the country’s economic performance, which will accordingly dictate the direction for domestic financial markets and international investors gauging the performance of the country’s economy.
