The Bank of Canada cut its benchmark interest rate by a quarter of a percentage point on Wednesday, the second straight reduction in the central bank’s easing cycle.
The Bank of Canada’s policy rate, which broadly informs the cost of borrowing across the country, now stands at 4.5 per cent.
The move was widely expected by economists as inflation continues to cool and the Canadian economy shows signs of weakness.
Bank of Canada governor Tiff Macklem said in prepared remarks Wednesday that he expects inflation will continue to slow going forward even as the central bank forecasts economic growth picking up in the second half of the year.
“We are increasingly confident that the ingredients to bring inflation back to target are in place,” he said.
The Bank of Canada’s interest rate easing cycle kicked off in June with a 25-basis-point cut.
Since the central bank began raising its policy rate in March 2022, elevated interest rates have ratcheted up borrowing costs for many Canadians, businesses and governments, discouraging spending in a bid to tame decades-high levels of inflation.
Macklem reiterated Wednesday that future rate decisions will come down to the latest economic data and how the Bank’s governing council expects that will affect the outlook for inflation.
“If inflation continues to ease broadly in line with our forecast, it is reasonable to expect further cuts in our policy interest rate,” he said.
“The timing will depend on how we see these opposing forces playing out. In other words, we will be taking our monetary policy decisions one at a time.”
CIBC chief economist Avery Shenfeld said in a note to clients Wednesday morning that the message from the Bank of Canada is that there’s room for more interest rate
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