Is today the day we finally see rate cuts?

With inflation stabilizing below 3% and the economy slowing, Bank of Canada (BoC) Governor Tiff “Big Mack” Macklem is expected to finally cut its policy rate today from 5% to 4.75%.

Driving the news: After 27 long months, rate easing would come as a relief for the millions of Canadians struggling to pay off debt and mortgages amid elevated borrowing costs. 

  • The BoC could still hold rates until July over fears that persistent consumer services spending could suddenly reignite inflation, as it did in the U.S. earlier this year.

Why it matters: Whether the BoC cuts rates now or later this summer, it’ll happen well before the U.S. Federal Reserve cuts. With the U.S. economy running hot, analysts think the Fed won’t cut rates until December, marking a rare divergence between the two banks.

  • Higher interest rates attract more foreign investors to a currency, boosting its value. A prolonged wide difference in rates could cause the loonie to fall even further behind the greenback.

Big picture: Europe can’t wait for the Fed, either. Sweden and Switzerland have already cut rates, and the European Central Bank is expected to do so tomorrow, as much of the continent is more concerned with scarily stagnating economies than inflation.—QH