Bank of Canada cuts key interest rate further to 4.5%

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The Bank of Canada cut its key interest rate to 4.5 per cent on Wednesday, a move that was widely expected by economists after inflation eased in June.

Last month, the central bank cut interest rates for the first time since March 2020. Two years later, it began a long and aggressive cycle of rate hikes to tame persistent inflation.

The bank brought key interest rates down by 25 basis points to 4.75 per cent during that June meeting. The rate had previously been held at five per cent since July 2023.

After a May inflation report showed that the consumer price index had crept up to 2.9 per cent, some analysts had doubts that the Bank would cut rates again in July. But June's 2.7 per cent inflation reading quelled those concerns.

Inflation trends have been directionally encouraging, even if some categories remain stubbornly elevated, wrote Bank of Montreal economist Benjamin Reitzes in a note.

Bank of Canada governor Tiff Macklem and senior deputy Carolyn Rogers will explain the interest rate decision during a 10:30 a.m. ET press conference, which will be livestreamed in this story.

With inflation expected to move closer to the bank's two per cent goal and economic conditions weakening, its governing council made the decision to lower the interest rate, according to a press release on the Bank of Canada website.

At the same time, price pressures in some important parts of the economy — notably shelter and some other services — are holding inflation up, the release noted. Governing Council is carefully assessing these opposing forces on inflation.

More to come.

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