Today, June 5, 2024 the Bank of Canada cut its overnight rate from 5.00% to 4.75%. See: Bank of Canada reduces policy rate by 25 basis points - Bank of Canada.
We can anticipate that by the June 2025 announcement date, that the overnight rate will have declined to between:
- 3.5% (a more conservative pace), and
- 2.5% (a more aggressive pace of 25 basis point decline each announcement date).
More conservative pace:
The C.D. Howe Institute's Monetary Policy Council has projected that rates would be only 3.5% by June 2025, so they are anticipating a slower than every policy announcement date. C.D. Howe Institute Monetary Policy Council Calls for Bank of Canada to Lower Overnight Rate to 4.75 Percent, Cut to 3.50 Percent by June 2025 | C.D. Howe Institute | Canada Economy News | Canadian Government Policy (cdhowe.org).
More aggressive pace:
We can consider the case where the Bank continues to cut its overnight rate by 25 basis points at each rate announcement until they reach what they consider to be the neutral interest rate (in 2023 this range was 2 to 3 per cent). It would take over a year to reach the mid-point of the neutral rate of 2.50%.
| Announcement Date | Overnight rate (more Aggressive Projection) |
| Apr-24 | 5.00% |
| Jun-24 | 4.75% |
| Jul-24 | 4.50% |
| Sep-24 | 4.25% |
| Oct-24 | 4.00% |
| Dec-24 | 3.75% |
| Jan-25 | 3.50% |
| Mar-25 | 3.25% |
| Apr-25 | 3.00% |
| Jun-25 | 2.75% |
| Jul-25 | 2.5% |
Somewhere between 2 and 3% is likely where the rate will stop declining; 2.5% is that mid-point.
