Bank of Canada delivers 1st rate cut since March 2020
The Bank of Canada lowered its benchmark interest rate by a quarter-percentage point on Wednesday, marking a significant turning point in the central bank’s efforts to tame inflation.
The Bank of Canada’s policy rate now stands at 4.75 per cent following six consecutive holds in previous meetings. The key rate informs the cost of borrowing widely in Canada, including what rates Canadians pay on their mortgages and other loans.
Homeowners with variable-rate mortgages, as well as Canadians with other kinds of debt tied to the central bank’s policy rate, will immediately see their interest rates drop by 25 basis points.
Bank of Canada governor Tiff Macklem said in prepared remarks Wednesday that the “considerable progress” made in taming inflation should be “welcome news” to Canadians.
“We’ve come a long way in the fight against inflation,” he said.
The Bank of Canada’s governing council is now confident enough in the cooling inflation trends that the central bank’s policy rate no longer needs to be as restrictive to restore price stability, Macklem said.
Canada has now become the first G7 nation to reduce interest rates amid a global effort to tame inflation. The Swiss National Bank was the first major economy to deliver rate relief in a surprise move in March, followed by the Swedish central bank in May.
Wednesday’s move was widely expected by economists and financial markets.
The rate cut came as annual inflation has cooled significantly from decades-highs in 2022, when the Bank of Canada’s tightening cycle began. The economy has also slowed and the labour market has loosened over the past two years, helping to relieve price pressures under the weight of higher interest rates.
The Bank of Canada said in a statement
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