Monday Market Minute | Sep 09, 2024

Three in a row — BoC cuts to 4.25% as the easing cycle deepens

What Moved

The Bank of Canada cut its overnight rate by 25 basis points to 4.25% on September 4, its third consecutive reduction. With inflation at target and the economy growing below potential, the Bank signalled that further cuts were likely. Governor Macklem's language shifted from cautious to forward-leaning, suggesting the pace of easing could even accelerate if economic conditions deteriorated further.

Why It Matters

Three consecutive cuts totalling 75 basis points confirmed this was a sustained easing cycle, not a one-off adjustment. Private credit yields had now declined approximately 75 basis points from their peak. PE deal multiples were adjusting upward as financing costs fell. Housing markets continued their recovery. The entire alternative investment landscape was repricing in real time.

Signal to Watch

The October decision was now the critical question mark. With 75bps already delivered, would the Bank consider a 50bp jumbo cut to accelerate normalization? The economic data between now and October 23 would determine whether the Bank shifted gears or maintained its 25bp cadence.

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