Canada cuts interest rates. What about the Fed?

Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019.
Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019.
REUTERS/Leah Millis

On Wednesday, the Bank of Canada cut its interest rate by a cautious quarter point to 4.75% for the first time in over four years. In April, inflation was 2.7%, close to the 2% target. Experts expect the Bank could cut rates again this year twice more as Bank Governor Tiff Macklem suggested inflation numbers were trending toward a return to normal, but he wasn’t going to rush things, saying “we are taking our interest rate decisions one meeting at a time” as concern about inflation persists despite the downward trend.

The rate cut is notable not just for Canada, but for the US and, in fact, several of its allies. Canada is the first G7 central bank to cut rates, which puts it ahead of the US Fed, which held rates steady last month between 5.25 and 5.5%, citing a slower than expected cooling of inflation.

Earlier this week, speaking to Politico, economist Frances Donald noted that with the European Central Bank expected rate cut, which arrived today as predicted with a quarter-point slash to 3.75%, and China’s cut, the world is facing an “atypical” situation in which the US Federal Reserve is behind the world, and that is “creating some turbulence,” at least for now.

Economists, politicians, bankers, and other market watchers will be waiting to see just how far the Fed will diverge from the G7, the ECB, and China – and whether there’s a broader realignment in the works or a slightly-slower-than-expected return to the Fed-led status quo.

More from GZERO Media

Open Call is the heart of Walmart’s $350 billion commitment to US manufacturing, supporting products made, grown or assembled in America. The pitch event represents a unique opportunity for selected entrepreneurs to meet face-to-face with Walmart merchants and earn a chance to get their products on store shelves nationwide. Last year, finalists from across the country represented 48 states, with entrepreneurs from over half these states receiving deals. It’s all a part of Walmart’s investment in American jobs and communities. Learn more about Walmart’s annual Open Call.

Last week, Microsoft released its 2025 Responsible AI Transparency Report, demonstrating the company’s sustained commitment to earning trust at a pace that matches AI innovation. The report outlines new developments in how we build and deploy AI systems responsibly, how we support our customers, and how we learn, evolve, and grow. It highlights our strengthened incident response processes, enhanced risk assessments and mitigations, and proactive regulatory alignment. It also covers new tools and practices we offer our customers to support their AI risk governance efforts, as well as how we work with stakeholders around the world to work towards governance approaches that build trust. You can read the report here.

Democratic mayoral candidates Andrew Cuomo, left, shakes hands with Zohran Mamdani, center, as Whitney Tilson reacts after participating in a Democratic mayoral primary debate, on June 4, 2025, in New York City.
AP Photo/Yuki Iwamura, Pool

New York City residents head to the polls today to vote in the Democratic primary election for mayor.

US President Donald Trump says that both Israel and Iran “don't know what the fuck they are doing” after violations of the ceasefire take place. Trump makes these remarks to the press as he boards Marine One for a trip to the NATO Summit on June 24, 2025.
Andrew Leyden/NurPhoto

The Iran-Israel ceasefire that US President Donald Trump announced yesterday evening is hanging by a thread this morning.