The Bank of Canada’s (BoC) recent meeting minutes reveal that the Governing Council anticipates a continued decline in upside inflationary pressures, suggesting that the current restrictive monetary policy may be eased.
On October 23, the BoC reduced its policy rate by 50 basis points to 3.75%, marking the fourth consecutive rate cut and the most significant in over four years. This decision reflects the Council’s confidence that inflation will remain subdued, allowing for a less restrictive approach to monetary policy.
The minutes also indicate that some officials were concerned that such a substantial rate cut might be misinterpreted as a sign of economic weakness, potentially leading to expectations of further large reductions. Despite these concerns, the Council agreed that a larger cut was appropriate given the current economic data.
Inflation in Canada eased to 1.6% in September, falling below the BoC’s midpoint target of 2%. However, economic growth has stalled, with GDP missing revised targets, prompting the central bank to consider further rate cuts to stimulate the economy.
The BoC’s approach reflects a balancing act between supporting economic growth and maintaining inflation within the target range. The Council remains vigilant, ready to adjust monetary policy as new economic data emerge.
