Both the Bank of Canada (BoC) and US Federal Reserve (Fed) have reduced rates by 25bps. The BoC’s overnight rate is now 2.5% and the target range for the federal funds rate is now 4.0% to 4.25%

The move by the BoC follows a cooling in underlying inflation pressures and a broadening deterioration in the labour market, along with a weaker economy in light of ongoing trade uncertainty that is constraining business investment. The move by the Fed follows recent indicators that economic growth has moderated, jobs gains have slowed, unemployment has edged up, and inflation remains somewhat elevated.

According to CIBC Capital Markets the BoC’s decision was widely expected, and that because the economy is losing resilience and inflation will continue to be contained by the elevated unemployment rate and removal of retaliatory tariffs, they anticipate another 25 basis points cut in October. The Fed rate cut was also expected, with the Federal Open Market Committee (FOMC) now signaling a stronger easing bias with the median voter favouring two more cuts by the end of the year, and one cut in each of 2026 and 2027.

In terms of what these decisions mean for investors, Leslie Alba, Head Portfolio Solutions, Total Investment Solutions, CIBC Global Asset Management, believes the path forward will depend on the effectiveness of policy measures and the resilience of business and consumer confidence. “Against this backdrop, we continue to diversify portfolios across asset classes and regions. In equities, our Managed Solutions allocate to Canadian, US, International, and Emerging Markets equities, positioning for expected policy support across the globe and potential changes in leadership. Meanwhile, bonds remain a crucial stabilizer, offering an attractive yield and potential gains if rates and/or inflation expectations decline.”

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