Bank of Canada's Tiff Macklem signals more rate cuts possible after historic shift
The Bank of Canada cut interest rates Wednesday for the first time since launching a historic hiking cycle to combat inflation in March 2022, marking a significant shift in monetary policy that could open the door to additional cuts in the coming months.
The central bank set its overnight rate at 4.75 per cent, down 25 basis points from the five-per-cent level that had been in place since rates peaked in July 2023.
“With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive,” the Bank of Canada said in a statement Wednesday, adding that recent data has increased confidence that inflation will continue to move toward the central bank’s target of two per cent.
“We’ve come a long way in the fight against inflation,” Bank of Canada governor Tiff Macklem said during a news conference following the rate announcement. “The considerable progress we’ve made to restore price stability is welcome news for Canadians.”
Over the past couple of years, Canadian consumers have struggled to keep up with inflation and then higher interest rates, with some falling behind on credit cards and car payments and as they faced higher monthly bills from food to rent and mortgage payments.
Markets had been betting on a cut this month after six consecutive holds leading up to Wednesday’s announcement and are now pricing in a further cut in September.
Arlene Kish, director of Canadian economics at S&P Global Market Intelligence, said in a note Wednesday that there could be two more 25-basis-point cuts this year and five more by the end of 2025, bringing the key overnight rate down to three per cent.
Macklem, who has previously indicated that rates are unlikely to
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