Bank of Canada Governor Tiff Macklem has said that more interest rate cuts are likely in the months ahead now that inflation has been brought back down to the central bank’s 2% target.
Speaking at a Toronto conference, Macklem said “With the continued progress we've seen on inflation, it is reasonable to expect further cuts in our policy rate.”
These were the Bank of Canada governor’s first comments since data showed that inflation across the country declined to 2% in August of this year.
The central bank targets inflation at the midpoint of an annualized 1% to 3% range, or about 2%. Inflation in Canada is down from a peak of 8.1% reached in June 2022.
Already this year, the Bank of Canada has lowered its benchmark overnight interest rate a total of 75-basis points, or three-quarters of one percent, to 4.25%.
The bank's next interest rate decision is scheduled for Oct. 23.
Futures traders are placing a 58% chance of a 50-basis point rate cut at the October meeting, followed by a 25-basis point reduction at the last meeting of the year in December.
In addition to inflation declining, the Bank of Canada has also lowered interest rates to help spur growth with indicators pointing to an economic slowdown taking hold across the country.
During his remarks in Toronto, Macklem said the central bank continues to closely monitor consumer spending and business investment throughout Canada.
The Bank of Canada has forecast that the economy likely grew an annualized 2.8% in this year’s third quarter.
