Bank of Canada cuts interest rate to 4.5%

The Bank of Canada cut its benchmark interest rate by 25 basis points on Wednesday for the second consecutive time, a widely expected move that brings its policy rate to 4.5 per cent. The rate cut comes as inflation moderated to 2.7 per cent in June, with price pressures broadly easing.

At the same time Canada’s labour market has stalled, as job growth has struggled to keep pace with the country’s surging population and it takes longer for people to find work. Economic growth also remains sluggish, falling short of its potential output.

“With broad price pressures continuing to ease and inflation expected to move closer to 2 per cent, Governing Council decided to reduce the policy interest rate by a further 25 basis points,” the Bank of Canada said in a statement.

“Ongoing excess supply is lowering inflationary pressures. 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.”

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