FX.co ★ TSX Pressured by Hawkish BoC Outlook

The S&P/TSX Composite Index dipped by approximately 0.3%, falling below the 30,350 threshold on Wednesday. This movement followed the Bank of Canada's anticipated decision to reduce interest rates by 25 basis points, coupled with more definitive forward guidance. The Bank of Canada lowered its policy rate by 25 basis points to 2.25%, indicating that this may be the final cut in the current easing cycle. This decision came amidst underwhelming economic growth, highlighted by a 1.6% contraction in Q2 GDP, and a less robust labor market, notwithstanding a temporary increase of 60,000 in payrolls that kept the unemployment rate around 7.1%. Persistent inflationary pressures, with headline CPI at 2.4% and the trimmed core measure at approximately 3.1%, dampened expectations of additional rate cuts. Consequently, the market considered the rate reduction to be anticipated, resulting in higher yields after the Bank presented this move as contingent on forthcoming economic data. Technology and financial sectors, which are sensitive to interest rate changes, led the market decline. Notably, Constellation Software experienced a drop of over 3%, while major banks such as RBC, TD, BMO, and Scotiabank each saw declines exceeding 0.5%.