06:53 AM EST, 12/12/2024 (MT Newswires) -- The Bank of Canada's Wednesday decision to cut rates is due to moderating inflation and slow economic growth, noted Naoum Tabet, Investment Director at Capital Group, following the reduction.

The BoC has implemented five rate cuts this year, with Wednesday's half-point reduction lowering the policy rate from 3.75% to 3.25%.

Before Canada's central bank decided to cut rates, the bond market had already anticipated it, with the short end of the yield curve moving down by 45bps, pointed out Tabet.

It's the second straight jumbo cut of 50bps and the BoC is expected to continue its easing cycle, with projections suggesting a total of four to five additional cuts over the next nine to 12 months, potentially bringing the rate down to around 2.25% by mid-2026, stated the investment director.

It's important to note that the recent depreciation of the Canadian dollar (CAD or loonie) may lead the BoC to avoid more outsized/jumbo cuts as it may lead to greater-than-expected deviations from United States monetary policy -- assuming Canadian economic conditions don't deteriorate more than anticipated, Tabet added.