Bank of Canada cuts key interest rate for 2nd consecutive time, to 4.5%
CBC
The Bank of Canada cut its key interest rate to 4.5 per cent on Wednesday, a move that was widely expected by economists after inflation eased in June.
The decision marks the central bank's second consecutive cut after last month's meeting, when it cut rates for the first time since March 2020. The bank began a long and aggressive cycle of rate hikes in April 2022 to tame persistent inflation.
The bank brought key interest rates down by 25 basis points to 4.75 per cent during that June meeting. The rate had previously been held at five per cent since July 2023.
After a May inflation report showed that the consumer price index had crept up to 2.9 per cent, some analysts had doubts that the Bank would cut rates again in July. But June's 2.7 per cent inflation reading quelled those concerns.
"Inflation trends have been directionally encouraging," even if some categories remain stubbornly elevated, wrote Bank of Montreal economist Benjamin Reitzes in a note.
Bank of Canada governor Tiff Macklem and senior deputy Carolyn Rogers spoke about the interest rate decision during a news conference that began at 10:30 a.m. ET.
With inflation expected to move closer to the bank's two per cent goal and economic conditions weakening, its governing council made the decision to lower the interest rate, Macklem said during the news conference.
"At the same time, price pressures in shelter and some other services are holding inflation up. We are increasingly confident that the ingredients to bring inflation back to target are in place," he said.
He said those opposing forces means a decline in inflation will most likely be gradual, with possible setbacks along the way. He kept the door open to further interest rate cuts should inflation continue to come down.
"If inflation continues to ease broadly in line with our forecast, it is reasonable to expect further cuts in our policy interest rate," Macklem said.
