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Tags: Bank of Canada, Canadian Dollar, Cut rate, Inflation, USDCAD
On Tuesday, Canada’s annual inflation rate slowed more than the expected of 1.8%, dropping to 1.6% in September from 2.0% in August. This easing in inflation was primarily driven by a significant decline in gasoline prices, which marked the smallest annual increase in consumer prices since February 2021, according to Statistics Canada. USD/CAD is trading near a 10-week low, having fallen 0.15% to close at 1.3775.
(USDCAD Daily Price Chart, Source: Trading View)
Consumer prices in Canada have steadily eased since the beginning of the year, reaching the midpoint of the Bank of Canada’s 1%-3% target range last month as high interest rates dampened consumer demand and business investments. As a result, the latest inflation data has prompted markets to increase bets on a 50-basis-point rate cut next week.
In fact, the Bank of Canada has already cut its policy rate by 25 basis points at each of its last three policy-setting meetings. Last month, Governor Tiff Macklem warned that inflation could fall below the target range and that economic growth might weaken, fueling hopes for a larger-than-usual 50-basis-point rate cut. Therefore, the Bank of Canada needs to take action to revive the economy and prevent inflation from dropping too far, with a 50-basis-point rate cut possibly being the right remedy.
(Canada Inflation and Interest Rate, Source: Statistics Canada)
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