Monday Market Minute | Jun 03, 2024

Two days out — the first rate cut since 2020 arrives Wednesday

What Moved

Markets entered the week of June 3 with near-total certainty: the Bank of Canada would cut its overnight rate by 25 basis points on Wednesday, June 5, bringing it from 5.00% to 4.75%. It would be the first cut since the emergency pandemic response in March 2020 — and the formal start of the easing cycle. Bond yields had already priced the move in, with the Canada 5-year falling below 3.6%.

Why It Matters

The symbolic weight of the first cut exceeded its mathematical impact. A single 25bp reduction would not materially change borrowing costs. But it marked the official end of the tightening era and the beginning of a multi-quarter easing path that would reshape private market valuations, deal flow, and capital allocation decisions for the next 12–18 months.

Signal to Watch

Macklem's forward guidance on Wednesday would be as important as the cut itself. Would the Bank signal consecutive cuts or a more cautious, data-dependent cadence? The answer would set the pace for the entire easing cycle.

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