Bank of Canada cuts benchmark interest rate by 50 basis points
2024-12-11
Category: economic

    The Bank of Canada slashed its key policy rate by 50 basis points to 3.25% on Wednesday and indicated further cuts would be more gradual, in a shift from previous messaging that continuous easing was needed to support growth.
MARKET REACTION: 
LINK: https://www.bankofcanada.ca/2024/12/fad-press-release-2024-12-11/
COMMENTS
AVERY SHENFELD, CHIEF ECONOMIST AT CIBC CAPITAL MARKETS
"Forget the meaningless little wiggles in inflation, because with unemployment on the rise, and growing uncertainties over US tariffs, there was ample reason for the Bank of Canada to deliver another larger dose of interest rate relief today. That matched our long-held call for two successive 50 bp (basis point) cuts, and leaves the overnight rate only quarter point lower than what we had forecast way back in the fall of 2023 for the end of this year."
ANDREW KELVIN, HEAD OF CANADIAN AND GLOBAL RATES STRATEGY AT TD SECURITIES
"It says that the economy as a whole is not in an especially strong place. The Bank of Canada would like to see growth pick up, which requires, on some level, a more active and robust consumer. They would like to put the consumer in a little bit of a better place."
"We are expecting 25 basis points cuts at the next four meetings, but we weren't necessarily expecting them to be quite so explicit and tell us about it." 
"It does seem as though they were just trying to get back to somewhere close to the neutral rate. And now that we are at 3.25% we are at the top of the range of estimates for the neutral rate." 
ROBERT COLANGELO, VICE PRESIDENT AT MOODY’S RATINGS
"The Bank of Canada's 50-bps benchmark rate reduction announcement reflects Canada's rising unemployment rate and a highly leveraged consumer sector, driving a more aggressive rate cut path than the US Fed."
"This rate cut will benefit borrowers with variable rate loans, which should slow credit quality deterioration at these banks in 2025, a credit positive."
"Additionally, should more rate cuts occur, Canadian banks could recover previously taken credit provisions on performing loans earlier than expected in 2025."  
NICK REES, SENIOR FX MARKET ANALYST AT MONEX EUROPE LTD
"The decision to cut by 50 bps (basis points) has largely been overshadowed by a hawkish shift in guidance from the BoC. While this is supporting loonie upside for now, we are inclined to think that tariffs will warrant substantial further policy easing in 2025, regardless of the bank's latest statements, which should ensure that this current bout of CAD strength is short-lived. "