Canada was the first to hike… and now, it’s the first to cut. On Wednesday, the Bank of Canada became the first major central bank to cut interest rates. Yesterday, the European Central Bank followed, slashing rates for the first time in five years. Both banks shaved 0.25% off their headline interest rates, a modest move that could kickstart a big shift.

• The rate reductions come after both economies saw inflation fall below 3%, with Canada’s inflation reaching a three-year low of 2.7% in April, and Europe notching a 2.6% rate in May.
• These cuts could benefit consumers, especially in Canada, where “highly indebted consumers” could see advantages from lower rates, as reduced interest rates generally decrease borrowing costs.

Next stop… The Bank of England and the Federal Reserve have yet to cut rates, but Canada and the EU have started a domino effect. Analysts expect the BoE and Fed to follow later this year, especially after US economic indicators such as consumer spending, gross domestic product (GDP), and consumer confidence deteriorated in recent weeks.