Monday Market Minute | Jul 22, 2024

BoC cuts again — consecutive reductions signal confidence in disinflation

What Moved

The Bank of Canada cut its overnight rate by 25 basis points to 4.50% on July 24, marking back-to-back reductions and confirming the easing cycle's momentum. Governor Macklem noted that inflation at 2.7% was "moving in the right direction" and that the economy needed lower rates to recover. The consecutive cuts placed the BoC firmly ahead of the Federal Reserve, which continued to hold.

Why It Matters

Back-to-back cuts eliminated any doubt about the BoC's commitment to easing. For private market investors, the signal was clear: the rate trajectory was lower and the pace was faster than many had expected. Private credit floating-rate loans began repricing downward. PE deal financing improved meaningfully. Mortgage renewal stress eased marginally — though the 2025 renewal wall remained a major concern.

Signal to Watch

The September 4 meeting would determine the pace going forward. A third consecutive cut would signal the Bank viewed restrictive policy as a greater risk than residual inflation — a fundamentally different posture than six months earlier.

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