Bank of Canada announced its latest monetary policy decision today at 2:45 pm BST. Bank was expected to deliver the second 25 basis point rate cut this year, after cutting rates back in June. This would put the main BoC interest rate at 4.50%. Such an outcome was expected by 17 out of 23 economists surveyed by Bloomberg, while money markets were pricing in an almost 90% chance of BoC cutting rates.
There was no surprise when an actual decision was released - Bank of Canada decided to cut rates by 25 basis points. Bank noted that the ongoing excess supply is lowering inflationary pressures but at the same time, price pressures in some important parts of the economy are holding up. BoC also noted that household spending has been weak and that there are signs of slack in the labor market. Nevertheless, BoC still sees economy's potential output growing faster than GDP, meaning excess supply has increased.
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appBoC expects inflation to average 2.6% in 2024 and to average 2.4% and 2.0% in 2025 and 2026, respectively. This means a slightly increase to 2025 forecast and small decrease in 2026. 2024 GDP growth is seen at 1.2%, down from 1.5% in April forecast, while 2025 GDP growth is seen at 2.1%, down from 2.2% in previous forecast. However, GDP forecast for 2026 was boosted from 1.9% to 2.4%.
USDCAD ticked higher following the decision, although market reaction on the pair may have also been influenced by release of flash PMIs from the United States, which showed beat in services and miss in manufacturing.
USDCAD bounced off the 1.3780 support zone after Bank of Canada delivered another 25 basis points rate cut. Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.