Canada’s inflation drops to 1.6%, fueling expectations of 50 bps rate cut

Posted on October 16, 2024   |  

Canada’s inflation rate fell to 1.6% in September, increasing the chances of a 50 basis point rate cut next week.

Consumer prices have steadily decreased this year, reaching the Bank of Canada’s target range of 1%-3% due to higher interest rates slowing spending and investments.

After the inflation report, Canadian swap markets raised the likelihood of a 50 bps rate cut to 67%, up from 52%.

The Canadian dollar dropped to a 10-week low, trading at 1.3833 to the U.S. dollar, or 72.29 U.S. cents.

According to the inflation data, Canada’s two-year government bond yields fell by 5.4 basis points to 3.164%.

The inflation slowdown has boosted expectations of a significant rate cut by the Bank of Canada.