Boc Cuts The Interest Rate

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Boc Cuts The Interest Rate

Boc Cuts The Interest Rate By 25 Bps

The Bank of Canada (BoC) has cut the interest rate in the country by 25 bps or around 0.25%. This was in line with the market consensus and thus was not a surprise at all.

After the rate cut by the BoC, the interest rate has now dropped to 4.75%. The reason why the BoC has lowered the policy rate is due to the easing of underlying inflation.

Easing Inflation Gives Confidence To Boc

According to the official statement, the bank added that there's sufficient evidence of a decline in inflation. As a result, the monetary policy doesn't have to be as restrictive anymore.

Additionally, the core inflation during the 3-month period has also gone down, which is yet another reason behind this move of the BoC.

Governor Tiff Macklem also commented on how it is totally reasonable to cut the policy rate. He also added that more rate cuts are not something that can be called unreasonable at this stage. This is a direct hint that the BoC is ready to deliver more rate cuts in the next few months.

Tiff Macklem added that the rate decisions will be taken step by step at each meeting. According to him, a major issue faced by the Canadian economy is excess supply. However, he believes there's still room for growth in the economy despite the declining inflation.

The BoC now has more confidence than ever that inflation is on the path toward the 2% range. As a result, the inflationary risks faced by the economy are now no longer uncontrolled.

Looking forward, the BoC will be focusing more on striking a balance between supply & demand. Some other issues that need the oversight of the BoC include corporate pricing behavior, wage growth, and inflation forecasts.

After the BoC's decision, the USD/CAD turned higher towards the 4-day highs and crossed the 1.3700 level. Overall, the decision was bearish for the Canadian Dollar as the investors are now flocking towards the greenback.

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