Gabriel Vergani/Dreamstime.com

By Jesse Gill

ECONOMY

Medicine Hat College instructor expects more rate cuts by Bank of Canada

Oct 24, 2024 | 3:50 PM

A Medicine Hat College business instructor says the Bank of Canada’s Wednesday rate cut is due to a weaker economy.

The Bank of Canada made an interest rate cut of a half a percentage point to bring it’s rate to 3.75 per cent.

This is the fourth cut to it’s key lending rate since June, with the previous cuts being a quarter of a percentage point each time.

Dillon Batsel, a business instructor specializing in economics and finance, said Thursday the larger cut this time was because inflation came down to 1.6 per cent, below the two-per-cent target the Bank of Canada targets.

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“When inflation slows down, it typically means that the economy is slowing down as well,” Batsel said.

“People aren’t spending as much, jobs are slowing down, unemployment tends to be a little bit higher,” he added.

“That interest rate drop hopefully stimulates spending, stimulates investment on the business side of things, and gets the economy kind of back moving again.”

Batsel said that speculation is that another 25-point cut is expected in December, with similar cuts expected into next year, continuing until it’s felt the economy is in a growing position.

This will benefit people looking to lease or finance vehicles and purchase homes, making it easier to qualify and, in turn, help stimulate the economy.

Batsel said it is trend is welcome for those borrowing on variable rates.

“It’s good and it’s bad. It can bring down payments for people, but at the same time, it’s usually a sign that the economy is not doing as well, or else they wouldn’t be lowering rates,” Batsel said.

“It’s kind of a double-edged sword in that sense. But hopefully the Bank of Canada achieves their soft landing in basically meaning lowering rates without going into a recession like they’re trying to do.”