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Borrowing costs are coming down for some Canadians after the Bank of Canada on Wednesday delivered its first interest rate cut since March, lowering its overnight benchmark by 25 basis points from 2.75 per cent to 2.5 per cent.
Commercial lenders, like private banks, base their rates off of the key policy rate set by the central bank.
The Bank of Canada noted a “weaker economy” amid the current trade war including the latest reports on GDP as well as the unemployment rising above seven per cent last month meant “a reduction in the policy rate was appropriate.”
Meanwhile, the Bank says inflation has remained relatively stable, with price growth for consumers and businesses falling within its target range of between one and three per cent on an annual basis.
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“With a weaker economy and less upside risk to inflation, Governing Council judged that a reduction in the policy rate was appropriate to better balance the risks,” the Bank of Canada said in the statement.
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“The disruptive effects of shifts in trade will continue to add costs even as they weigh on economic activity. Governing Council is proceeding carefully, with particular attention to the risks and uncertainties. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.”
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The Bank of Canada had previously held its overnight rate for the past three meetings, with Governor Tiff Macklem on multiple occasions referring to the “uncertainty” of the economic outlook requiring a more cautious approach to monetary policy — especially with the evolving trade war and tariff policies.
Macklem is scheduled to deliver remarks and answer questions at a press conference starting at 10:45 a.m. EST.
– More to come
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