Markets Expect A Bank of Canada Rate Cut On July 24

Markets have fully priced in a 25-basis point interest rate cut from the Bank of Canada when the central bank next meets on July 24.

Economists and futures traders anticipate that the Bank of Canada will lower its trendsetting overnight interest rate from its current level of 4.75% as inflation continues to decline.

The latest data from Statistics Canada showed that inflation across the country fell to 2.7% in June of this year, down from a peak of 8.1% in June 2022.

The Bank of Canada targets inflation at the midpoint of an annualized 1% to 3% range.

Canada’s central bank previously lowered interest rates by 25-basis points at its policy meeting in June of this year, its first rate reduction in four years.

Along with declining inflation, recent data has pointed to a slowing economy in Canada, with unemployment rising and business growth slumping.

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Economists say the combination of easing inflation and slowing economic growth gives the Bank of Canada latitude to cut interest rates further.

Lower interest rates come as Canadian households continue to report strained household finances.

A recent survey by BDO Debt Solutions found that about half of Canadians say higher interest rates have negatively impacted their debt and finances.
There is also hope that lower interest rates will spur the Canadian housing market which has slumped under high mortgage rates that remain above 6% at the country’s banks.