Saturday, May 31, 2025

Latest

Can Canada Cut Rates Even As the US Holds Steady?

Bank of Canada Governor Tiff Macklem addressed the Canadian legislature’s finance committee on Thursday, discussing the central bank’s ability to cut interest rates while the Federal Reserve maintains elevated levels. Macklem’s testimony came amid concerns that a series of rate cuts by the Bank of Canada, combined with the Fed’s decision to keep rates steady, could lead to a weaker Canadian dollar and subsequently higher inflation.

Macklem acknowledged that Canada’s flexible exchange rate allows for some divergence in monetary policy from the United States, but he also noted that there is a limit to how far interest rates can differ between the two countries. However, he emphasized that Canada is not close to reaching that limit.

“Because we have a flexible exchange rate we can run our own monetary policy, so our interest rates in Canada don’t need to be the same as the US rate,” Macklem said to the finance committee. “There is a limit to how far they can diverge, [but] we’re certainly not close to that limit.”

When questioned about the level of weakness in the Canadian dollar that the central bank is willing to tolerate, Macklem refrained from providing a specific threshold. 

“I’m not going to draw a line in the sand,” he said. “Clearly, if we cut interest rates and that weakens the Canadian dollar, that is something you have to take into account.”

Market participants anticipate the Bank of Canada to begin cutting rates in June, with expectations of four reductions in total, bringing the benchmark interest rate down to 4% from its current 5% level. In contrast, the Fed has maintained its benchmark rate between 5.25% and 5.5%. Macklem indicated that the Bank of Canada is “getting closer” to rate cuts but wants to ensure that the recent slowdown in inflation is sustainable.

The governor also noted that higher interest rates in Canada have caused more strain on consumption compared to the US, due to differences in the mortgage market and higher household debt levels in Canada. While some economists believe that the Bank of Canada can cut rates by a full percentage point below the Fed without causing significant disruption, others suggest that a move below 4.5% will depend on the sensitivity of the Canadian dollar and the evolution of domestic economic conditions.


Information for this story was found via the Wall Street Journal, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply

Video Articles

How To Profit From $3300 Gold? An Inside Look At A Massive 300,000 Oz Project | Martino De Ciccio

We’re At The Start of a Great Silver Boom | Ross McElroy & Andy Bowering – Apollo Silver Corp

Equinox Gold Q1 Earnings: When Everything Goes Wrong

Recommended

ESGold Begins Concentration Tests Ahead Of First Production

Sterling Metals Hits 0.21% Copper Over 482.8 Metres In First Drilling At Soo Copper project

Related News

Bill Ackman, Who Pushed For “Aggressive” Interest Rate Hikes, Now Wants The Fed To Pause

Bill Ackman, the founder of Pershing Square Capital and an American billionaire investor, believes the...

Tuesday, March 21, 2023, 11:27:08 AM

Bank Of Canada Cuts Interest Rates For Seventh Consecutive Time To 2.75%

The Bank of Canada announced today a 25 basis point reduction in its target for...

Wednesday, March 12, 2025, 10:07:27 AM

High Interest Rates and Household Debt: A Ticking Time Bomb for the Canadian Real Estate Market?

The Bank of Canada is sounding the alarm on the impact of rising interest rates...

Wednesday, May 24, 2023, 06:17:00 AM

More Pain to Come: Bank of Canada Poised to Deliver Another Colossal Rate Hike Into Restrictive Territory

With inflation running at 40 year-highs, consumers face a tough road ahead. But, according to...

Tuesday, September 6, 2022, 04:22:00 PM

The Food Professor Says Carbon Tax’s Inflation Impact Four Times Higher Than Initially Reported

A recent thread on X (fka Twitter) by Dr. Sylvain Charlebois of the Agri-Food Analytics...

Wednesday, November 1, 2023, 02:13:00 PM