Bank of Canada cuts key interest rate to 3.25% Bi Investing.com

OTTAWA–In an attempt to cushion slower economic growth and a weakening labor market, the Bank of Canada cut its key interest rate by half a percentage point.

This adjustment, announced on Wednesday, lowers the target overnight rate to 3.25% from 3.75% previously.

This decision marks the second consecutive cut by half a point and the fifth consecutive cut in the benchmark interest rate, which at the beginning of 2024 was 5%.

Governor Tiff Macklem, in prepared remarks for a press conference Wednesday morning, indicated that the central bank has significantly reduced borrowing costs by a total of 1.75 percentage points since June.

He emphasized that the full effects of these cuts have yet to be realized in the economy.

Macklem further stated: “We expect a more gradual approach to monetary policy if the economy develops broadly as expected. Our decisions will be guided by incoming information and our assessment of the implications for the inflation outlook.”

The change in Bank of Canada policy also includes a change in its forward-looking guidance. Unlike previous statements, the central bank refrained from signaling further rate cuts, suggesting a pivot in its strategy for future rate decisions.

This latest rate cut is unique in that it is the first instance outside of a recession or extraordinary event, such as the Covid-19 pandemic, the 2008-2009 financial crisis, and the September 11, 2001, terrorist attacks, that the central bank has implemented back-to-back rate cuts points.

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