Monday Market Minute | Dec 09, 2024

BoC delivers another jumbo — 50bp to 3.25% closes out a historic year

What Moved

The Bank of Canada cut its overnight rate by 50 basis points to 3.25% on December 11, capping a historic easing cycle of 175 basis points across five cuts in seven months. Governor Macklem cited the need to support an economy facing trade uncertainty and slowing growth, while noting that inflation at target provided the freedom to act decisively. The rate now sat at the upper bound of the Bank's estimated neutral range.

Why It Matters

The full-year rate trajectory — from 5.00% to 3.25% — reshaped every corner of Canadian private markets. Private credit yields compressed but remained attractive relative to public fixed income. PE deal activity rebounded sharply. Housing recovered. Infrastructure financing improved. The 2024 vintage across alternative asset classes benefited from the rare combination of entry at peak rates and exit into an easing cycle.

Signal to Watch

The Bank's forward guidance suggested a slower pace in 2025, with further cuts dependent on economic data and trade developments. Whether the overnight rate would settle at 2.75%, 2.50%, or lower would define the next chapter for Canadian alternative investments.

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