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“Even with today’s move, a 4.5 per cent policy rate that’s well north of inflation is still quite restrictive,” and will continue to hamper spending and the housing market, said Rishi Sondhi, economist at TD Bank.Ìý

In other words, Wednesday’s cut won’t bring significant relief to Canadians just yet.Ìý

The job market is now weaker since the depths of the pandemic, with some economists arguing that certain pockets of the population, particularly youth and recent immigrants, are living under circumstances similar to a recession.Ìý

The housing market, too, has come to a halt, as prospective buyers wait on the sidelines for more rate cuts.Ìý

Bank of Canada senior deputy governor Carolyn RogersÌýreferred to theÌýhousing crisis as a “structural imbalance” in Wednesday’s news conference.

She acknowledged the policy interest rate’s impact on shelter inflation through higher mortgage costs, but said that “it would be a mistake to pin all of our hopes … on interest rates,” adding that “Canadians need a more fulsome and more co-ordinated policy response than that.”Ìý

The bank expects inflation to averageÌý2.3 per cent this quarter and return “sustainably” to its two per cent target in the second half of 2025, according to its July monetary policy report.Ìý

“That provides some support to our view that a third consecutive cut in September is the most likely outcome,” Stephen Brown, deputy chief economist at Capital Economics, wrote in a note to clients.Ìý

Brown believes that the central bank will continue to cut the key rate by 25 basis points at each meeting until it reaches 2.5 per cent.Ìý

The Bank of Canada raised rates 10 times,Ìýto five per cent from 0.5 per cent, between March 2022 and last summer in a bid to wrestleÌýinflation down to its two per cent target.Ìý

The theory is that by making it more expensive to borrow money, consumers and businesses will spend less, driving down prices and slowing the economy.

Now, as the economy slows and inflation has been moving downward, the bank is taking the reverse approach, trying to stimulate growth by cutting interest rates.

The bank is forecasting stronger economic growth in the second half of 2024 driven by a boost in exports and consumer spending, according to its monetary policy report.Ìý

“The key point is that the bank is aware that GDP growth could be strong, and its communications today suggest that a much better quarter for GDP will not prevent further rate cuts,” saidÌýBrown.Ìý

With files from Josh Rubin