Addressing the House of Commons Standing Committee on Finance, BoC Governor Tiff Macklem explained the rationale behind last week’s 50bps rate cut, highlighting that “inflation is now back to the 2% target”. He emphasized that Canada is now in a period of “low inflation,” and the bank’s priority is to “maintain low, stable inflation” and successfully “stick the landing.”
Macklem noted that the rate cut is also intended to “contribute to a pickup in demand” in an economy that remains “soft.” Looking forward, BoC anticipates a “gradual” strengthening of the Canadian economy in 2025 and 2026, supported by lower interest rates.
If economic conditions align with the bank’s outlook, Macklem anticipates “cutting our policy rate further” to sustain demand and stabilize inflation around target.
However, he clarified that decisions on timing and scale will be data-driven, with BoC will take monetary policy decisions “one at a time”.
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