In a significant move, the Bank of Canada has reduced its benchmark interest rate by 25 basis points to 4.5%. This decision, signals the start of an easing cycle, making the Bank of Canada the first major central bank to lower rates amidst the current global economic conditions.
The reduction comes after a period of aggressive rate hikes aimed at curbing high inflation. The Bank of Canada had raised the rate to 5% in July 2023, maintaining it until this recent cut. The central bank’s decision reflects increased confidence that inflation is on a downward trajectory, approaching the 2% target. Recent data showed the inflation rate at 2.7% in April 2024, reinforcing the decision to ease monetary policy (BNN) (Yahoo Finance).
This rate cut is expected to provide relief to Canadians with variable-rate mortgages, as they may see reduced interest payments. However, the impact on fixed-rate mortgage holders may be less pronounced, especially for those renewing at rates higher than those secured during the pandemic.
Governor Tiff Macklem indicated that further rate cuts are likely if inflation continues to decline. Economists predict additional reductions in the Bank of Canada’s benchmark rate throughout 2024 and into 2025,
For more details on the Bank of Canada’s rate cut and its implications, visit the full articles on BNN Bloomberg and Yahoo Finance.
