Bank of Canada May Cut Interest Rates Again

The Bank of Canada is set to cut its overnight interest rate by 25 basis points to 4.25% on September 4, marking a third consecutive reduction as inflation drops to a 40-month low of 2.5%. Economists predict further cuts, potentially lowering the rate to 3.75% by the end of 2024 and to 2.75% by mid-2025, as the central bank shifts its focus from controlling inflation to stimulating economic growth. This trend aligns with broader global monetary policy shifts, including expected rate cuts from the U.S. Federal Reserve. The Canadian economy is anticipated to grow by 1.7% in 2025, aided by easing borrowing costs and increased export activity. The outlook reflects concerns over a weak labor market and a need for fiscal relief amidst elevated government debt service costs. Overall, these developments suggest a coordinated approach to navigate economic challenges while aiming for a 'soft landing' for the economy.