What the Bank of Canada’s ‘supersized’ interest rate cut means for Manitobans

Posted on October 23, 2024 by Peggy

It’s being hailed as a sizable cut to the Bank of Canada’s interest rate and the largest since the central bank began slashing in the summer.

The BoC announced Wednesday it was cutting its key lending rate from 4.25 per cent to 3.75 per cent as the global economy continues to grow.

“We took a bigger step today because inflation is now back to the two per cent target, and we want to keep it close to the target,” Bank of Canada Governor Tiff Macklem said in a statement.

The half percentage point cut is the fourth rate cut in a row by the bank as inflation dropped from 2.7 per cent in June to 1.6 per cent in September.

“It was a big announcement,” said financial analyst Bryan Borzykowski.

“A lot of people were anticipating it, and they followed through on what people are calling a supersized rate cut.”

The central bank expects inflation to stay around two per cent in October as its surveys suggest business and consumer expectations of inflation have shifted downward and are approaching normal levels.

Borzykowski said the cuts will be felt most immediately by Canadians with variable rate mortgages and lines of credit.

He added those with fixed rate mortgages might not see much of a difference.

“Those have already come down because they anticipate where the rate cuts have gone, but if you’re renewing your mortgage right now and you’re still at a low rate from pre-2022, you will have to pay more.”

Businesses may also start feeling more comfortable borrowing more given the lower rate, Borzykowski predicted.

Macklem said the decline in inflation over the last few months is fueled by the combined effects of lower oil prices, a dip in shelter price inflation and lower prices for consumer goods, like cars and clothes.

Borzykowki believes there will be more rate cuts down the road, but not as sizable as Wednesday’s announcement.

“The danger here is if they cut too fast, do people feel too comfortable, start spending again, and inflation rises, so they’re going to be watching that, but they don’t want to make it too restrictive on people because they want the economy to grow again, and we’re anticipating slower growth.”

Macklem also signaled more rates could be coming if the inflationary trends continues.

“Now, our focus is to maintain low, stable inflation,” said Macklem. “We need to stick the landing.”

– With files from CTV’s Mike Le Couteur

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