On Wednesday morning, the Bank of Canada announced a reduction in its key overnight lending rate, decreasing it by 25 basis points to 4.5 percent from the previous 4.75 percent. This decision aligns with the expectations of economists, reflecting the current economic climate characterized by a cooling economy, reduced inflation in June, and an increase in unemployment.
The central bank, which makes eight interest rate decisions annually, has three more scheduled for this year, including meetings in September, October, and December. This latest rate cut follows a previous reduction on June 5, when the bank lowered the overnight rate by a quarter percentage point to 4.75 percent. This marked the first time since last July that the rate had fallen below five percent and the first rate cut in over four years.
Between March 2022 and last summer, the bank raised rates ten times in an effort to curb inflation and achieve its two percent target. Inflation had peaked at 8.1 percent in June 2022 as the Canadian economy reopened from COVID-19 restrictions. The central bank’s strategy aimed to make borrowing more expensive, thereby reducing consumer and business spending, driving down prices, and slowing the economy.
However, with the current economic slowdown and a general downward trend in inflation, the Bank of Canada is now reversing its approach. By cutting interest rates, the central bank aims to stimulate economic growth. Further updates and analyses are anticipated as the economic situation continues to evolve.
Source: Swifteradio.com
