The Bank of Canada has reduced interest rates at its second meeting in a row, lowering the key interest rate by 25 basis points to 4.5%.
The cut was widely expected by analysts after inflation in Canada slowed in June, coming in at 2.7%.
“With broad price pressures continuing to ease and inflation expected to move closer to 2%, Governing Council decided to reduce the policy interest rate by a further 25 basis points,” the central bank said in a statement on Wednesday.
“At the same time, price pressures in some important parts of the economy—notably shelter and some other services—are holding inflation up. Governing Council is carefully assessing these opposing forces on inflation.”
The bank expects its preferred measures of core inflation to slow to about 2.5% in the second half of this year and ease gradually through 2025.
“The bank expects CPI inflation to come down below core inflation in the second half of this year, largely because of base year effects on gasoline prices,” it said. “As those effects wear off, CPI inflation may edge up again before settling around the 2% target next year.”
The bank also highlighted that in the United States, the anticipated economic slowdown “is materializing, with consumption growth moderating. US inflation looks to have resumed its downward path.”
Last month, the Bank of Canada cut interest rates for the first time since March 2020, bringing the key interest rate down by 25 basis points to 4.75% after being held at 5% since July 2023.