Bank of Canada Reduces Interest Rates Again To 4.5 Percent, Hints at More Cuts
“We are increasingly confident that the ingredients to bring inflation back to target are in place,” Macklem said in his opening remarks.
In a significant move, the Bank of Canada has lowered its policy interest rate for the second time in a row, suggesting that more cuts could be on the way if inflation continues to decline. This latest adjustment, a reduction of 25 basis points, brings the overnight rate to 4.5 percent, levels not seen since June 2023. Last month’s cut from 5 percent to 4.75 percent marked the first reduction in over four years.
Bank of Canada Governor Tiff Macklem explained that the decision was driven by economic data indicating a slowdown in the labour market, an excess supply in the economy, and a continued drop in inflation.
“We are increasingly confident that the ingredients to bring inflation back to target are in place,” Macklem said in his opening remarks.
Since the Bank of Canada began increasing rates in March 2022, inflation has decreased significantly. It dropped from a peak of 8.1 percent in June 2022 to 2.7 percent in June 2024, after a slight uptick in May.
Looking forward, Macklem expressed optimism about the inflation outlook. “Looking ahead, we expect inflation to moderate further, though progress over the next year will likely be uneven,” he noted.
If the trend of easing inflation persists, Macklem indicated that Canadians could anticipate additional rate cuts. However, these decisions will be made cautiously and individually.
“If inflation continues to ease broadly in line with our forecast, it is reasonable to expect further cuts in our policy interest rate,” Macklem said. “The timing will depend on how we see these opposing forces play out.”