Bank of Canada cuts its key interest rate

“I think Canada can breathe a sigh of relief,” said Bank of Canada governor Tiff Macklem yesterday, after the BOC announced a cut in its key “policy rate” to 3.75 percent, half a percentage point (or 50-basis-points) lower than its previous 4.25 percent.

The “sigh of relief” that Macklem was talking about referred to the central bank’s battle against inflation, which was 1.6 percent in September, StatCan said. The BOC has said that keeping inflation below 2.0 percent would partially guide its interest rate decisions.

The inflation was caused, principally, by the end of the pandemic. The BOC policy rate was 0.25 percent in March 2022. After a relentless series of interest rate hikes designed to stem inflation, it climbed to 5.0 percent by July 2023.

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