Bank of Canada cuts key interest rate by half point for first time since COVID-19 pandemic

Posted on October 23, 2024 by Peggy

The Bank of Canada has lowered its key interest rate to 3.75 per cent, making a 50 basis-point cut for the first time since the COVID-19 pandemic.

Before Wednesday, the rate stood at 4.25 per cent. Economists were expecting the central bank to go with a larger-than-usual cut, compared to the 25-basis-point downgrades made in June, July and September.

The last time the bank made a cut this size was on March 27, 2020.

As concerns over inflation have subsided — out-of-control price growth, the catalyst for the central bank’s initial rate-hike campaign, is now back within the target range — the bank has focused on cutting to keep inflation stable and support economic growth, which has slowed under the pressure of high rates.

“We need to stick the landing,” Bank of Canada governor Tiff Macklem told a news conference Wednesday morning.

A bank news release said that, should the economy continue to evolve broadly in line with its forecast, “we expect to reduce the policy rate further.”

But it cautioned that the timing and pace of cuts would depend on incoming economic data and its potential impact on the bank’s inflation outlook.

The release repeated a now-familiar refrain: “We will take decisions one meeting at a time.”

Avery Shenfeld, chief economist of CIBC World Markets, wrote in a note to clients that “it would take a significant turn of events to stand in the way of another cut of that magnitude in December.”

“That said, as has been its practice of late, the bank has kept its options open by not signalling anything specific about the size of individual rate cuts ahead,” Shenfeld wrote.

Macklem is addressing a news conference explaining the decision, which will be live-streamed on this page starting at 10:30 a.m. ET.

WATCH | Bank of Canada governor explains rate cut decision:

Bank of Canada makes interest rate announcement

Started 33 minutes ago

Bank of Canada governor Tiff Macklem and senior deputy governor Carolyn Rogers are speaking after the bank’s latest decision on the target for the overnight rate. As inflation cools, many are anticipating that the central bank will deliver another cut to its key interest rate, which currently sits at 4.25 per cent.

More to come.