The Bank of Canada lowered the target for the overnight rate by 50 basis points for the second straight meeting, a decision in line with consensus and market expectations. This is the fifth rate reduction in as many meetings and brings the policy rate to 3.25%, or the upper end of the BoC’s estimated neutral range (2.25% to 3.25%). The move also pushes the BoC’s policy rate 150 bps below the Federal Reserve’s upper bound target, the most since 1997 (although that gap will likely narrow next week). Meanwhile, balance sheet normalization will continue as expected. Here are additional highlights from the communique and the opening statement to the press conference:

• Driving the decision to cut 50 bps was inflation around 2%, excess supply and softer growth ahead relative to earlier expectations. Macklem added in the opening statement to the press conference that “monetary policy no longer needs to be clearly in restrictive territory”.
• As for forward rate guidance, the press release notes “we will be evaluating the need for further reductions in the policy rate one decision at a time”. In the presser, Macklem said they expect “a more gradual approach to monetary policy if the economy evolves broadly as expected”. Note they no longer explicitly say they expect to cut their policy rate further.
• The statement notes that Q3 growth was “somewhat below” the Bank’s projection and Q4 growth “looks weaker than projected”. Slower immigration will ease growth in 2025 while proposed fiscal measures will support demand. They will look through temporary demand effects.
• The press release highlights that job growth continues to grow slower than labour supply. Wage growth “showed some signs of easing, but remains elevated relative to productivity”.
• As for inflation, they still expect CPI to hover around 2% for the next couple of years. They note that the GST holiday will “temporarily lower inflation” but that will be unwound once the holiday ends. Therefore, watching core inflation will be critical to see underlying trends.
• The Bank didn’t have much to say on tariff threats other than noting that these have “increased uncertainty and clouded the economic outlook.” \

https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf