The Bank of Canada might soon reduce interest rates, potentially affecting the Canadian dollar, which has already weakened by 1.7% against a robust U.S. dollar. This depreciation coincides with the possibility of the Bank of Canada cutting rates earlier than the U.S. Federal Reserve, which now might delay its rate cuts until December or later. The disparity between the monetary policies of the two banks could further dim the outlook for the Canadian dollar, now predicted to drop to 72.99 US cents this quarter. Such currency weakness could inadvertently stoke inflation, adding potential complications to Canada's economic strategy. Governor Tiff Macklem has indicated that the central bank is closely monitoring the currency's impact on economic forecasts. This comes at a time when historical precedents suggest the Bank of Canada might need to adjust its course swiftly to manage economic stability effectively.
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