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The wait is finally over as the Bank of Canada has started reducing its interest rates.

Well, the wait is finally over as The Bank of Canada has started reducing
its interest rates in the first of what we expect to be a number of interest rate cuts over the coming months.
We do, though, have to be a little bit cautious about what this initial reduction in interest rates may mean for the economy.
Financial markets had already been anticipating that interest rates would be coming down.
So those interest rate cuts were already priced into the mortgage rate that many consumers pay.
So as the overnight rates is being reduced, those fixed-term mortgage rates
haven&#8217;t come down to much as yet.
The second thing we have to remember is that even based on our forecasts for the overnight rate come down to 4% by the end of this year, around 3% by the end of 2025.
That is still a higher interest rate than we had become accustomed to before the pandemic.
And so some households will still be refinancing at a higher interest rate and maybe having to reduce their consumer spending in response to that.
For now, though, let&#8217;s enjoy this first interest rate cut and hopefully some more to come.

What does the first interest rate cut mean for the Canadian economy ?

Andrew Grantham

Senior Economist

CIBC