The Bank of Canada announced on Wednesday that it has lowered its key interest rate by 25 basis points to 2.5 per cent.
This is the first cut to interest rates by the central bank since March.
In his opening statement, governor Tiff Macklem said the decision was a “clear consensus” among members of the governing council.
“With a weaker economy and less upside risk to inflation, governing council judged that a reduction in the policy rate was appropriate to better balance the risks,” the bank wrote in a statement on Wednesday morning.
The bank had kept the policy rate at 2.75 per cent for three consecutive meetings, citing high uncertainty around U.S. President Donald Trump’s tariffs and ongoing inflation pressures.
But now, with unemployment on the rise and economic activity contracting, some economists have been calling on the bank to resume adding support to the economy.
Inflation data released Tuesday also showed that prices rose by less than expected, further supporting the argument for a cut. Macklem acknowledged that the removal of most retaliatory tariffs by Canada helps ease inflation pressures.
Going forward, bank officials warned they will be “proceeding carefully, with particular attention to the risks and uncertainties.”
The bank said it will continue to assess how U.S. tariffs are impacting the economy as a whole, including business investment, employment and household spending. It will also observe changes to consumer prices and how inflation expectations evolve.
“The bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled,” the bank’s statement read.
The announcement will be followed by a press conference with Macklem and senior deputy governor Carolyn Rogers at 10:30 a.m.
This is a developing story.
