Bank of Canada Cuts Key Interest Rate to 4.75%

 

First Rate Cut Since March 2020

The Bank of Canada has lowered its key interest rate from 5% to 4.75%, marking the first rate cut since March 2020. Bank governor Tiff Macklem cited cooling inflation and hinted at possible further rate cuts.

Inflation Eases, GDP Growth Slows

Canada's inflation rate has moved closer to the bank's 2% target, coming in at 2.7% in April. Quarterly GDP numbers released last week showed weaker-than-expected growth, increasing the likelihood of a rate cut.

Gradual Rate-Cutting Cycle Expected

Economists predict a gradual rate-cutting cycle, with the Bank of Canada taking a cautious approach to avoid jeopardizing progress made in the fight against inflation.

Positive News for Variable Rate Mortgage Holders

The rate cut is good news for variable rate mortgage holders, who can expect to save money on their monthly payments. Joseph Hopkinson, a Toronto resident with a variable mortgage, welcomes the cut, saying it will have a tangible impact on his family's budget.

Experts Weigh In

Royce Mendes, managing director and head of macro strategy at Desjardins, calls the cut a "grand gesture" and expects a gradual rate-cutting cycle. Andrew Grantham, CIBC economist, predicts another 25 basis point cut at the next meeting, with two more cuts before the end of the year. Tu Nguyen, economist with RSM Canada, sees the cut as a signal for a gradual and orderly rate cut cycle that will unfold over the next year and a half.  

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