OTTAWA–In a move to mitigate slower economic growth and a weakening labor market, the Bank of Canada has reduced its main interest rate by half a percentage point.
This adjustment, announced on Wednesday, brings the overnight rate target down to 3.25% from the previous 3.75%.
This decision marks the second consecutive half-point cut and the fifth consecutive reduction in the benchmark interest rate, which stood at 5% at the beginning of 2024.
Governor Tiff Macklem, in prepared remarks for a Wednesday morning press conference, indicated that the central bank has substantially lowered borrowing costs by a total of 1.75 percentage points since June.
He emphasized that the full effects of these reductions are yet to be realized in the economy.
Macklem further stated, “We anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected. Our decisions will be guided by incoming information and our assessment of the implications for the inflation outlook.”
The Bank of Canada’s policy shift also includes a change in its forward 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 events, such as the Covid-19 pandemic, the 2008-2009 financial crisis, and the September 11, 2001 terrorist attacks, where the central bank has implemented back-to-back half-point reductions.
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