The Bank of Canada has cut its overnight lending rate by another 25 basis points.

The central bank reduced its prime rate to 4.25% on Wednesday morning, marking its third consecutive cut of the summer. The widely expected move comes after a prolonged period of rate holds and hikes designed to reduce inflation.

Tiff Macklem, the BoC’s governor, continues to display a dovish stance on rates after maintaining a hawkish position that led to several rapid hikes following the COVID-19 pandemic.

The latest BoC 25-bps cut came after the central bank reduced the overnight lending rate by a total of 50 bps in July and June. Those cuts resulted after an extended period of holds and hikes designed to reduce inflation.

Commercial real estate industry leaders expressed optimism following Wednesday’s cut but were still wary of the impact of lingering high rates on the market.

“With additional rate cuts expected in October and December, transaction activity may remain muted in anticipation of lower borrowing costs,” said Ray Wong, an Altus Group vice-president. “However, we should see some increase in activity in identifying opportunities for core assets following this decision.

“The main challenge we face, right now, is the lack of product and the continued bid-ask gap in expectations between buyers and sellers. Obviously, we need to keep an eye on inflation, GDP growth, and employment – but I think we may also see cap rates start to flatten in the coming months.”

Maria Solovieva, a Toronto-Dominion Bank economist, and other economists and analysts had predicted that the cut would come after the U.S. Federal Reserve signalled that it will introduce rate reductions this month.

Pictured: Bank of Canada Governor Tiff Macklem