Bank of Canada Governor Tiff Macklem takes part in a news conference after announcing an interest rate decision in Ottawa, Ontario, Canada March 6, 2024.Blair Gable/Reuters

Jeremy Kronick is associate vice-president and director of the Centre on Financial and Monetary Policy at the C.D. Howe Institute, where Steve Ambler, a professor of economics at Université du Québec à Montréal, is the David Dodge Chair in Monetary Policy.

With CPI inflation slowing to 2.5 per cent in July, the rate cut announced by the Bank of Canada on Wednesday surprised no one.

Given the dovish tone of the bank’s announcement, it would be reasonable to expect at least one and possibly two more 25-basis point cuts before the end of this year (a basis point is one-hundredth of a percentage point).

This cut widened the gap between the Bank of Canada’s overnight rate target and the top of the U.S. Federal Reserve’s band for its equivalent, the federal funds rate, from 50 basis points at the end of May to 1.25 per cent.

Should this gap worry the Bank of Canada – perhaps lead it not to cut the overnight rate again even if it otherwise wants to? We think the answer is no, for the........

© The Globe and Mail