The Bank of Canada (BoC) announced a 50 basis points (bps) rate cut today, bringing the target for the overnight rate to 3.25%.

CIBC Capital Markets says today’s rate cut by the BoC was expected and is in line with forecasts. The overnight rate is now at the top end of the BoC’s estimate range for a neutral rate. If neutral is 2.75% (the midpoint of the range), today’s announcement may be enough for the BoC to return to 25 bps rate cuts in the new year. Policymakers are starting to look for signs they’ve done enough to help lower inflation and stabilize the Canadian economy. The BoC confirmed it has eased rates substantially and will be making interest rate decisions one meeting at a time in the new year.

Capital Markets stated that unless we get a material dose of fiscal stimulus for 2025, the sluggish growth path and considerable economic slack may warrant a monetary policy that dips into stimulative territory. Capital Markets expects a series of 25 bps cuts to bring the target for the overnight rate to 2.25% by mid-2025 and says it will be interesting to watch how the threat of proposed US tariffs will influence future interest rate decisions. For investors, lower interest rates present unique opportunities for both equity and fixed income investments within your portfolio.

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