Monday Market Minute | Jun 10, 2024

The pivot is here — BoC cuts to 4.75% and the easing cycle begins

What Moved

On June 5, the Bank of Canada cut its overnight rate by 25 basis points to 4.75% — the first reduction since March 2020 and the end of the most aggressive tightening cycle in a generation. Governor Macklem confirmed that with inflation at 2.7% and the economy operating below capacity, "it is reasonable to expect further cuts" if disinflation continued. The Canadian dollar weakened against the USD as the BoC moved ahead of the Federal Reserve.

Why It Matters

The first cut was a defining moment for private markets. Private credit portfolios began recalibrating for lower base rates. PE sponsors unlocked deal financing that had been too expensive at 5%. Housing markets received the rate-relief signal buyers had been waiting for. Bond prices rallied. The entire alternative investment landscape shifted from "waiting for the pivot" to "positioning for the easing cycle."

Signal to Watch

The July 24 decision was now in play. A back-to-back cut would signal urgency; a hold would suggest a cautious quarterly cadence. For private market investors, the pace of cuts mattered as much as the direction — it would determine the speed of yield compression and valuation recovery.

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