Bank of Canada Governor Tiff Macklem is widely expected to introduce an oversized interest-rate cut on Wednesday.

Most analysts anticipate that the central bank will announce a 50-basis-point reduction, according to multiple reports.

The large cut is anticipated after the BoC implemented three consecutive summer reductions, dropping the overnight lending rate to 4.25%.

“Once you see everything kind of in line, there are good reasons to move quickly and come down,” Paul Beaudry, a former deputy governor at the BoC and an economics professor at the University of British Columbia, told the Globe and Mail.

The BoC maintained a prolonged monetary tightening policy to get inflation closer to its 2% target. A larger cut is considered conducive now because inflation dropped to 1.6% in September, and most economists view the current level as being too restrictive at this point in the economic cycle, according to the Globe.

“There are certain costs of moving too quickly, Beaudry told the Globe. “:But the case for bringing it down is really there,” Mr. Beaudry, who retired from the central bank last year, said in an interview.

Macklem signalled in September that rates will continue to decline if inflation remains under control but he has not said anything on the topic lately, while economists changed their expectations of what the BoC will do, wrote TD Bank Group Chief Economist Beata Caranci in a research note.

She found herself “in an unusual position of advocating for a 25-basis point reduction in the Bank of Canada policy rate come Wednesday, when all bank peers have moved into the 50 basis-point-camp.”

She noted that economists changed their expectations after a Bloomberg report in September showed that most were anticipating a 25-bps cut.

“Wednesday will tell us how beholden the BoC is to market expectations,” she wrote.

The BoC does not traditionally make a larger cut in the middle of a monetary cycle, other than during a recession, Caranci added. She suggested that a large cut could be ill-timed and hurt the value of the Canadian dollar versus its U.S. counterpart.

Photo: Bank of Canada Governor Tiff Macklem