The Canadian and American economies are deeply intertwined. With the United States Federal Reserve cautious amid mixed signals from the labour market and rising inflation worries, the Bank of Canada has just lowered its key interest rate to 3.75 per cent — cutting it by half a percentage point.
Strong U.S. job growth and cooling inflation could result in a smaller Fed rate cut compared to its previous cut and to Canada’s recent cut. It could also pause the rate entirely, which may change economic conditions in the U.S. and Canada in the months to come. Upcoming U.S. elections complicate the problem further.
In Canada, cooling inflation, slowing manufacturing sales and more cautious consumer spending opens the door to another half percentage point rate cut by the end of the year.
