The Bank of Canada has lowered its benchmark interest rate by 25 basis points to 4.75 per cent – the first rate cut since March 2020.
The move marks a significant turning point in the Bank’s efforts to curb inflation, which eased further in April to 2.7 per cent.
Canadian economic growth resumed in the first quarter of 2024, depite falling slightly behind the Monetary Policy Report (MPR) projection. First-quarter GDP growth was 1.7 per cent, while consumption growth sat at 3 per cent. Business investment and housing activity also increased during the first quarter.
“With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive […]” the Bank said in a statement.
“Recent data has increased our confidence that inflation will continue to move towards the 2 per cent target. Nonetheless, risks to the inflation outlook remain. Governing council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth and corporate pricing behaviour.”
The next scheduled date for announcing the overnight rate target is July 24, 2024. While the Bank remains cautious, consumers can breathe a sigh of relief for the time being.
