Bank of Canada cuts interest rates by 25 bps

The Bank of Canada cut its key interest rate by 25 basis points to 4.5% at the 2024/7 meeting, as anticipated by some in the market. This extends the measures by which the central bank lowered it by 25 basis points from the June meeting after leaving 5%, which is the final interest rate in the interest rate hike cycle, unchanged for 10 months.

The Bank of Canada's policy board pointed out that the oversupply in the Canadian economy has helped slow inflation in recent months, and the Canadian labor market is showing signs of easing, so monetary policy relaxation is necessary.

The central bank also pointed out that lower interest rates, combined with indicators that emphasize oversupply, may contribute to the deceleration of mortgage and housing costs, which are the biggest contributors to inflation.

The Policy Board anticipates that due to the base effect of gasoline prices, the CPI inflation rate will decline in the latter half of this year and stabilize at the 2% level in 2025.

Source: Bank of Canada