Instant view: Bank of Canada cuts rates for third time in a row, frets over weak growth

TORONTO (Reuters) - The Bank of Canada cut its key policy rate by 25 basis points to 4.25% on Wednesday as forecast but expressed concern that weaker-than-expected growth might mean inflation falls too quickly.

MARKET REACTION: [CAD/]

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COMMENTS

ROYCE MENDES, DIRECTOR & HEAD OF MACRO STRATEGY AT DESJARDINS

"The housing market is barely responding to lower rates as affordability remains a major hurdle. To unlock the savings that households have built up, we think the Bank of Canada will need to continue cutting interest rates at each of its decision dates until at least the middle of next year. With growth faltering instead of picking up as officials had forecast back in July, the risk is that central bankers will need to slash rates in October by 50 bps (basis points) instead of 25 bps to spur a recovery."

DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS

"Of course this was widely expected. The market had built in a slight chance of a 50-basis-point move, but I don't think the bank quite had enough information since the last meeting to take that aggressive step. I think that the door is still open to the possibility of more aggressive actions.

But bigger picture, we believe this is the third in what will likely be a series of interest rate cuts. We have seen both slightly better-than-expected inflation readings and slightly worse-than-expected unemployment readings and that points in one direction and that direction is lower rates."

STEPHEN BROWN, DEPUTY CHIEF NORTH AMERICA ECONOMIST, CAPITAL ECONOMICS

"Following its third consecutive 25 bp (basis point) interest rate cut today, the communications from the Bank of Canada reiterated that further interest rate cuts are likely. The tone of the communications was less dovish than we expected following the signs of a slowdown in GDP growth at the start of the third quarter, suggesting a relatively high bar to a larger 50 bp cut at the next meeting in October."

ANDREW DICAPUA, SENIOR ECONOMIST, CANADIAN CHAMBER OF COMMERCE

"Rates need to come down and it's becoming clear that the economy is on shakier ground than it was six months ago. I didn't see anything in the decision on presenting a clear path for rates but it's pretty obvious that policy will unwind at the next few meetings to support economic growth."

ANDREW KELVIN, HEAD OF CANADIAN AND GLOBAL RATES STRATEGY, TD SECURITIES

"It's a pretty dovish 25-basis-point move."

"It really seems like they're trying to highlight the factors that could contribute to lower inflation. They seem to be downplaying some of the factors that might argue for a more balanced approach. They seem pretty comfortable with the idea that wage inflation will slow. They seem pretty comfortable with the idea that shelter inflation will slow. When you put it all together this is a central bank that is looking for reasons to continue easing."

(Reporting by Fergal Smith and Anna Mehler Paperny, Editing by William Maclean and Marguerita Choy)