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Bank of Canada cuts key rate for first time in more than 4 years
6/5/2024 | Posted in Canadian Economy and Interest Rates by Paul DeAdder | Back to Main Blog Page
The Bank of Canada has cut its overnight rate by 25 basis points, a move not seen since the beginning of the pandemic.
Wednesday’s announcement puts the policy rate at 4.75 per cent, down from the 5 per cent it has been sitting at since July of last year.
The bank began raising its key interest rate in March of 2022, following larger-than-expected inflation numbers that followed a period of pandemic stimulus and disrupted global supply chains.
The central bank now sees enough evidence that underlying inflation is easing at a sustainable level. The Canadian central bank will be the first to cut rates among its peers at the Bank of England, the European Central Bank and the United States Federal Reserve.
“We’ve come a long way in our fight against inflation,” said Bank of Canada Governor Tiff Macklem, during prepared remarks in Ottawa. “And our confidence that inflation will continue to move closer to the 2 per cent target has increased over recent months.”
The inflation rate was at 2.7 per cent in April, down from 2.9 per cent in March of this year. The economy grew by 1.7 per cent in the first quarter of 2024, below what the bank forecasted.
Employment grew by 90,000 in April, driven mainly by part-time employment. While employment has not kept up with the working-age population, it has allowed the number of workers to catch up to job vacancies and wage pressures have started to ease.
However, Macklem warned that risks to the inflation outlook remain and that the decision on further rate cuts will be made one meeting at a time.
“But if we lower our policy interest rate too quickly, we could jeopardize the progress we’ve made,” said Macklem. “Further progress in bringing down inflation is likely uneven and risks remain.”
The next rate announcement is scheduled for July 24.
Source: CTV News
