The Bank of Canada made a decision to cut rates by 50 basis points on December 11 in order to address slower growth. Governor Tiff Macklem indicated that further cuts would be more gradual, a departure from previous messaging that continuous easing was necessary to support growth. The minutes revealed that there were discussions within the governing council on whether a 50 basis point or a 25 basis point cut would be more appropriate. Members of the council acknowledged that it was a close call, with some preferring a larger cut due to concerns about weaker growth outlook and downside risks to inflation, while others favored a smaller cut, pointing out signs of strength in consumption and housing activity.
The decision to opt for a larger cut reflected a weaker growth outlook than forecasted in October and the fact that monetary policy no longer needed to be clearly restrictive. There were differing views among governing council members on the future path for interest rates, with some anticipating further reductions in the policy rate at future meetings. They agreed to take each decision one meeting at a time. The minutes also highlighted that while there were signs of strength in consumption and housing activity, a larger cut was deemed necessary to address the weaker growth outlook and potential risks to the inflation forecast.
The minutes revealed that discussions within the governing council were focused on whether a 50 basis point or a 25 basis point cut was more appropriate given the economic conditions at the time. Members acknowledged that the decision was a close call, with some expressing concerns about a weaker growth outlook and downside risks to inflation, while others noted signs of strength in consumption and housing activity. The decision to opt for a larger cut reflected a shift in the outlook for growth compared to October and a recognition that monetary policy was no longer as restrictive as previously thought.
Governor Tiff Macklem indicated that further cuts would be more gradual, signaling a change from previous messaging that continuous easing was needed to support growth. Despite differing views among governing council members on the future path for interest rates, they agreed that further reductions in the policy rate would likely be considered at future meetings. The minutes also emphasized the importance of taking each decision one meeting at a time. Overall, the decision to cut rates by 50 basis points was seen as necessary to address the weaker growth outlook and potential risks to the inflation forecast.
In conclusion, the Bank of Canada’s decision to cut rates by 50 basis points on December 11 was a close call, with discussions within the governing council on whether a larger or smaller cut was more appropriate. The decision to opt for a larger cut reflected concerns about a weaker growth outlook and potential risks to the inflation forecast. Moving forward, governing council members anticipate further reductions in the policy rate at future meetings, with a focus on taking each decision one meeting at a time. Despite differing views among council members, the decision to cut rates was seen as necessary to address the changing economic conditions and ensure continued support for growth.
