Money markets are betting Bank of Canada might make ‘micro rate cut’ next week

[Financial Post – January 12, 2021]

TORONTO — Money markets see an increased chance of the Bank of Canada cutting interest rates closer to zero, as tightening economic restrictions to contain a second wave of COVID-19 cases offset optimism that activity will rebound later this year.

Interest rates were thought to have hit rock bottom in Canada after they were slashed 150 basis points last March to a record low of 0.25 per cent, a level the Bank of Canada considered the effective lower bound. But in November, Governor Tiff Macklem said a lower floor could allow Canada’s central bank to ease further if the economy weakens.

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