- Prior was 2.75%
- Virtually all economists surveyed expected the Bank of Canada to lower rates by a quarter point
- The previous cut was in March
- The rate-cutting cycle started last June
Highlights of the statement:
- Global economic growth is showing signs of slowing
- Preferred measures of core inflation have been around 3% in recent months, but on a monthly basis the upward momentum seen earlier this year has dissipated
- Underlying inflation is running around 2½%
- The federal government’s recent decision to remove most retaliatory tariffs on imported goods from the US will mean less upward pressure on the prices of these goods going forward
- Governing Council is proceeding carefully, with particular attention to the risks and uncertainties
- Looking ahead, the disruptive effects of shifts in trade will continue to add costs even as they weigh on economic activity.
- We will support economic growth while ensuring inflation remains well controlled
Key line:
Governing Council will be assessing how exports evolve in the face of US tariffs and changing trade relationships; how much this spills over into business investment, employment, and household spending; how the cost effects of trade disruptions and reconfigured supply chains are passed on to consumer prices; and how inflation expectations evolve.
The Bank of Canada last held rates steady at 2.75% in late July. The market was 95% priced for a rate cut and 52% priced for a further cut at the October meeting. Further out the curve, the market was pricing in 58 bps in easing by June, including the 25 bps today.
USD/CAD was trading at 1.3761 ahead of the decision, up 23 pips on the day. The initial movement on the decision has been choppy but settled at pre-decision levels which isn't a big surprise given Fed risks later. Bank of Canada Governor Tiff Macklem will hold a press conference at 1030 am ET.
BOC rate history
