The Bank of Canada is widely expected to cut interest rates by another 50 basis points at its final policy meeting of the year on December 11.
Futures markets are currently placing odds at 85% that the Bank of Canada will cut interest rates by 50 basis points, or half a percentage point, in the coming days, according to LSEG data.
Twenty-one out of 27 analysts polled by Reuters, including economists at each of Canada’s six largest banks, expect a half-point cut.
Such a cut would lower the Bank of Canada’s benchmark interest rate overnight to 3.25% from 3.75% and would be the fifth time in a row since June of this year that the central bank has cut interest rates.
Financial markets had expected a 25 basis point rate cut on December 11 after a half percentage point cut in October.
However, this calculus has changed in recent days after several economic indicators came in weaker than expected, particularly Canada’s high unemployment rate.
GDP growth fell short of the Bank of Canada’s expectations in the third quarter of this year, and the unemployment rate jumped to 6.8% in November from 6.5% the previous month.
Canada’s unemployment rate is now at its highest level since January 2017.
With the national economy weakening, most economists now expect a deeper 50 basis point interest rate cut from the central bank to help stimulate growth.
Meanwhile, inflation in Canada is currently at the Bank of Canada’s annual target of 2%, giving it room to further cut interest rates.
