The Bank of Canada has cut its key interest rate by 0.25% to 4.75%, marking the bank’s first rate cut since March 2020.
The move was largely expected by economists.
In recent months, the inflation rate has moved toward the Bank’s 2% goal, with the Consumer Price Index coming in at 2.7% in April.
Additionally, the Bank’s preferred measures of core inflation have also slowed and three-month measures suggest continued downward momentum, it highlighted.
“With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points,” the Bank of Canada said in a statement.
Economists immediately predicted that the Bank would again cut rates at its next meeting, Reuters reported.
At a press conference following the announcement, Bank governor Tiff Macklem said the Bank is going to take things “one meeting at a time.”
"We don't want monetary policy to be more restrictive than it needs to be to get inflation back to target. But if we lower our policy interest rate too quickly, we could jeopardize the progress we've made," Macklem said.
The Bank of Canada last increased the key interest rate to 5% in July 2023, where it has been held until Wednesday’s cut.