Great Mortgages.  The Right Insurance.  Expert Advice.

Bank of Canada cuts again! Why and what’s next.

As widely anticipated, the Bank of Canada reduced its policy interest rate by -0.25% (-25 basis points). This is the second consecutive reduction, and the ninth reduction over the past twelve Bank of Canada meetings. This brings the policy rate down to 2.25% and the prime rate down to 4.45%. Both are now sitting at the lowest point in over three years.

Why did the Bank of Canada lower rates?

As outlined by Tiff Macklem, Governor of the Bank of Canada, the decision to lower the rate reflects four main messages:

  • “First, US tariffs and trade uncertainty have weakened the Canadian economy…”
  • “Second, while this weakness is restraining price increases, the trade conflict is also…putting upward pressure on inflation. We expect these opposing forces to roughly offset, keeping inflation close to the 2% target.”
  • “Third, to support the economy…we have lowered our policy rate by 50 basis points over our last two meetings and by 100 basis points since the start of the year.”
  • “And finally, the weakness we’re seeing in the Canadian economy is more than a cyclical downturn. It is also a structural transition…”

What’s Next for the Bank of Canada?

While forecasts vary, the big 6 banks believe we are at, or very close to, the bottom of this rate-cutting cycle. While a few banks expect one final -0.25% rate cut at the next meeting on December 10th, the majority believe the Bank of Canada is now finished with rate cuts.

The Bank of Canada echoed this sentiment when it stated “Governing Council sees the current policy rate [2.25%] at about the right level to keep inflation close to 2%…over the projected horizon”. That being said, “if the outlook changes, we [the Bank of Canada] are prepared to respond.”

Looking for more information?

We have prepared the attached info guide that covers the following topics:

  • What were major bank economists expecting, and what would be next?
  • What are the key takeaways from the Bank of Canada’s Monetary Policy Report (economic forecast)
  • Potential mortgage market implications now and moving forward.

These questions and more are answered in our info guide below [CLICK HERE to download the guide].

We hope you find this guide helpful.  If you would like any additional details about the recent Bank of Canada decision or forecasts, or to review any specific rate/product options given the current interest rate outlook, please let us know, as we’d be happy to help.