Monday Market Minute | Jun 03, 2024
The Bank of Canada prepares to cut rates for the first time since March 2020. Private markets enter a new cycle.
What Moved
Markets entered the week of June 3 with near-total certainty: the Bank of Canada would cut its overnight rate by 25 basis points on Wednesday, June 5, bringing it from 5.00% to 4.75%. It would be the first cut since the emergency pandemic response in March 2020 — and the formal start of the easing cycle. Bond yields had already priced the move in, with the Canada 5-year falling below 3.6%.
Why It Matters
The symbolic weight of the first cut exceeded its mathematical impact. A single 25bp reduction would not materially change borrowing costs. But it marked the official end of the tightening era and the beginning of a multi-quarter easing path that would reshape private market valuations, deal flow, and capital allocation decisions for the next 12–18 months.
Signal to Watch
Macklem's forward guidance on Wednesday would be as important as the cut itself. Would the Bank signal consecutive cuts or a more cautious, data-dependent cadence? The answer would set the pace for the entire easing cycle.