Bank of Canada cuts key interest rate to 4.75%
CBC
The Bank of Canada has lowered its key interest rate to 4.75 per cent, marking the bank's first rate cut since March 2020.
Economists were largely expecting the move. The inflation rate has moved closer to the bank's two per cent goal in recent months, coming in at 2.7 per cent in April, with the bank's preferred core measures of inflation also easing throughout the spring.
Meanwhile, quarterly GDP numbers released last week were weaker than expected: the economy grew by 1.7 per cent during the first three months of the year, increasing the likelihood of a cut.
After a cycle of aggressive interest rate hikes, the Bank of Canada last hiked the rate to five per cent in July 2023 and held it there until Wednesday's cut.
Bank governor Tiff Macklem said in opening remarks that the bank's monetary policy no longer needs to be as restrictive.
"We've come a long way in the fight against inflation. And our confidence that inflation will continue to move closer to the two per cent target has increased over recent months," Macklem said.
But he stressed that the Bank of Canada is going to take things "one meeting at a time."
Canadians can reasonably expect more cuts so long as inflation continues to ease, and the bank maintains its confidence that inflation is steadily approaching the bank's two per cent goal, Macklem said.
"We don't want monetary policy to be more restrictive than it needs to be to get inflation back to target. But if we lower our policy interest rate too quickly, we could jeopardize the progress we've made," he said.
CIBC economist Andrew Grantham wrote in a note to clients that "with core inflation decelerating and growth remaining tepid there wasn't a good excuse to not begin the process of moving rates lower today."
Macklem and senior deputy governor Carolyn Rogers are holding a press conference explaining the decision at 10:30 a.m. ET. A livestream can be found above.
