The Bank of Canada is widely expected to lower interest rates by 50-basis points at its next policy meeting scheduled for Oct. 23.
Futures markets are betting on a larger rate reduction from Canada’s central bank after the country’s annual inflation rate in September fell to 1.6%, which is below the Bank of Canada’s 2% annualized target.
The Bank of Canada has already reduced interest rates a total of 75-basis points this year, undertaking three cuts of 25-basis points each.
Now, economists and markets are bracing for a bigger 50-basis point rate reduction as evidence mounts that inflation has been tamed and the Canadian economy is slowing.
Bank of Canada Governor Tiff Macklem has said that the central is prepared to lower interest rates more aggressively if inflation continues to decline. He also said that he wants to see economic growth across Canada accelerate.
Although Canada’s economy continues to grow, gross domestic product (GDP) has shrunk on a per-capita basis for five consecutive quarters.
The Bank of Canada’s benchmark overnight interest rate currently stands at 4.25%.