The Bank of Canada has lowered its key interest rate to 4.75 per cent, marking the bank's first rate cut since March 2020.
Bank governor Tiff Macklem said in opening remarks that the bank's monetary policy no longer needs to be as restrictive.
"We've come a long way in the fight against inflation. And our confidence that inflation will continue to move closer to the two per cent target has increased over recent months," Macklem said.
Economists were largely expecting the move. The inflation rate has moved closer to the bank's two per cent goal in recent months, coming in at 2.7 per cent in April, with the bank's preferred core measures of inflation also easing throughout the spring.
Rate Cut Surprises Economists
- The Bank of Canada's decision to cut interest rates by 25 basis points to 4.75 per cent surprised economists, who had widely expected the central bank to hold rates steady.
- The move comes as inflation remains elevated, but has shown signs of cooling in recent months.
- The Bank of Canada cited weaker-than-expected economic growth in its decision to cut rates, noting that the economy grew by only 1.7 per cent in the first quarter of the year.
What the Rate Cut Means for You
- Variable-rate mortgages: If you have a variable-rate mortgage, your monthly payments will decrease as a result of the rate cut.
- Fixed-rate mortgages: If you have a fixed-rate mortgage, your monthly payments will not be affected by the rate cut.
- Savings accounts: The interest rate on your savings account may increase as a result of the rate cut.
- GICs: The interest rate on your GIC may increase as a result of the rate cut.
Bank of Canada Signals More Rate Cuts to Come
The Bank of Canada has signalled that it is prepared to cut interest rates further if necessary to support the economy.
"We are committed to bringing inflation back to target and will continue to monitor economic developments closely," Macklem said.
The next scheduled interest rate announcement by the Bank of Canada is set for July 24, 2024.
| Date | Interest Rate |
|---|---|
| March 2020 | 0.25% |
| July 2023 | 5.00% |
| June 2024 | 4.75% |
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