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CIBC Economics

The Bank of Canada cut interest rates by another half a percent, but in doing so, policy makers seem much less committed to future interest rate cuts than they had in the past.
Now, while we agree that any future reductions should be smaller in magnitude, they should be quarter point reductions.
We do still see scope for further interest rate declines, which will help to spur the Canadian economy.
The labour market in Canada is probably even weaker than the headline numbers suggest.
Yes, the unemployment rate has risen, but it would have risen even further were it not for people dropping out of the labour market.
The rise that we have seen in the unemployment rate has also broadened in recent months as well.
It is not just a story anymore of young people and newcomers coming into the country, not being able to find work.
Other groups are being impacted as well.
So, while future interest rate cuts will be smaller, we still see further declines.
We see four quarter point cuts coming in 2025, and for the overnight rate to reach 225 by the middle of next year.

What comes next after the Bank of Canada’s second large interest rate cut?

CIBC Economics

Andrew Grantham

Senior Economist

CIBC