The Bank of Canada on Wednesday reduced its key benchmark rate by 50 basis points to 3.75 per cent, its first bigger-than-usual move in more than four years, and hailed signs the country had returned to an era of low inflation.
The central bank, which hiked rates to a 20-year high to fight soaring prices, has now cut four times in a row since June. Inflation in September sank to 1.6 per cent, below the 2 per cent target.
"We took a bigger step today because inflation is now back to the 2% target and we want to keep it close to the target," Governor Tiff Macklem said in his opening remarks.
Despite three previous cuts totalling 75 basis points, demand has been muted, sales at businesses are sluggish and consumer sentiment is tepid, hurting economic growth.
"Today's interest rate decision should contribute to a pickup in demand," Macklem said, adding the BoC would like to see growth strengthen.
The U.S. Federal Reserve last month started its own rate reduction cycle with a similar size move.
The last time the Bank of Canada cut rates by 50 bps at a scheduled meeting was in March 2020.
The headline September inflation rate of 1.6 per cent underscored concerns that the high cost of borrowing might have suppressed the rise in prices more than the economy needed.
Macklem, referring to recent economic data and the bank's own surveys, said "all this suggests we are back to low inflation. This is good news for Canadians."
He continued: "Now our focus is to maintain low, stable inflation. We need to stick the landing."
Before the announcement, money markets were fully pricing in another 25 basis point cut in the final monetary policy decision announcement of the year on Dec. 11.
Macklem reiterated that if the economy continued to evolve broadly in line with forecasts, the bank would cut rates again, with the timing and pace depending on the latest data.
Canada's economic growth has sputtered under the impact of high rates. July GDP grew by just 0.2 per cent on a monthly basis and provisional data suggest August growth will likely stall.
The Bank of Canada on Wednesday reduced its key benchmark rate by 50 basis points to 3.75 per cent, its first bigger-than-usual move in more than four years, and hailed signs the country had returned to an era of low inflation.
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The Bank of Canada on Wednesday reduced its key benchmark rate by 50 basis points to 3.75 per cent, its first bigger-than-usual move in more than four years, and hailed signs the country had returned to an era of low inflation.
A new report suggests that Canadians' exposure to a radioactive gas is increasing, putting millions of people at a higher risk of developing lung cancer.
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The Bank of Canada on Wednesday reduced its key benchmark rate by 50 basis points to 3.75 per cent, its first bigger-than-usual move in more than four years, and hailed signs the country had returned to an era of low inflation.
A new report suggests that Canadians' exposure to a radioactive gas is increasing, putting millions of people at a higher risk of developing lung cancer.
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