In the previous announcement, Bank of Canada governor Tiff Macklem said central bankers needed to see housing inflation and other price pressures ease to continue lowering rates.

Bank of Canada cuts key rate to 4.25%

In the previous announcement, Bank of Canada governor Tiff Macklem said central bankers needed to see housing inflation and other price pressures ease to continue lowering rates.

The Bank of Canada cut its key overnight lending rate for a third consecutive time on Wednesday. The Bank announced a quarter-percentage-point reduction to 4.25 per cent. Governor Tiff Macklem said in his opening statement that it would be “reasonable” to expect further cuts if inflation continues to ease in line with the Bank’s forecast. Economists widely expected the move, according to a Bloomberg survey, following cuts of the same size in June and July. In the previous announcement, Macklem said central bankers needed to see housing inflation and other price pressures ease to continue lowering rates. Overall inflation fell to 2.5 per cent in July, while shelter inflation rose at a slower pace compared with June, supporting the case for another reduction this week. Meanwhile, the labour market continued to weaken in recent months, and despite the economy growing in the second quarter, real gross domestic product fell on a per-person basis. “Clearly the economy is struggling,” wrote BMO economist Benjamin Reitzes in a note to clients on Tuesday. “With that backdrop, there’s no reason for policy rates to remain above neutral, which looks to keep the BoC on a rate cutting path well into 2025.” On Friday, Statistics Canada will release August employment numbers. Reitzes forecasts the jobless rate to tick slightly higher to 6.5 per cent from 6.4 per cent in July, but said that a bigger increase in unemployment could lead to “more aggressive” interest rate cuts in 2024. The Bank of Canada has two more meetings scheduled until the end of the year in October and December. Economists are forecasting each of those meetings to deliver quarter-percentage-point cuts, bringing the overall key rate to 3.75 per cent by year-end, according to the Bloomberg survey. This is a developing story.