Bank of Canada Follows U.S. Federal Reserve, Cuts Interest Rates by 50 Basis Points

The Bank of Canada announced a 50 basis point rate cut to 3.75%, in line with the U.S. Federal Reserve, a move widely anticipated by the market. The announcement triggered an immediate reaction, particularly in the bond market and the Canadian dollar’s performance.

The yield on Canada’s 2-year government bonds fell by 2.1 basis points to 3.013% following the rate cut. Meanwhile, the USD/CAD exchange rate saw a slight dip, currently standing at 1.3843. Technical analysis indicates that USD/CAD found support near the 1.3800 level, suggesting minimal short-term downside pressure.

The Bank of Canada’s latest forecast signals that policymakers are aiming for a “soft landing,” with GDP growth expected at 1.2% this year, accelerating to just over 2% next year. Inflation is projected to remain around the midpoint of the 1%-3% target range. Governor Macklem hinted that further rate cuts may be on the horizon, but the timing and scale remain uncertain. This uncertainty has kept market participants on high alert regarding the future path of monetary policy.

Vikki Zhao

PUBLISHED October 23, 2024, 10:36 AM EST. 1 min read

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