Global News, Dec 23, 2024
The Bank of Canada delivered a second consecutive interest rate cut of half a percentage point on Wednesday, but signalled the pace of easing may slow as uncertainty builds in the Canadian economy.
The central bank’s policy rate now stands at 3.25 per cent after the fifth rate cut in a row.
The move was widely expected by markets and economists amid signs of a slowdown in Canada’s economy.
Bank of Canada governor Tiff Macklem said Wednesday that with the central bank now having “substantially” cut its policy rate since June, Canadians should not expect as rapid a pace of cuts.
“We anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected,” he said.
Macklem confirmed that the Bank of Canada is considering “further reductions in the policy rate.”
But he did not provide much more specifics when asked by reporters about whether that means monetary policymakers will revert to more typical 25-basis-point steps at future meetings or whether a pause in the rate-cut cycle was in the cards.
“What does a more gradual approach mean? Well, we’ve just cut by 50 basis points at the last two meetings. So more gradual is more gradual than that,” he said.
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The central bank’s policy rate broadly sets the cost of borrowing in Canada and is a key input for interest rates Canadians pay on their mortgages and other loans. Monetary policymakers raise the rate to slow spending in the economy and tamp down inflation, and reduce it when it’s time to stimulate growth again.
The latest half-point cut brings the Bank of Canada’s policy rate to the top end of its “neutral” range, where the cost of borrowing is viewed as neither overly restricting or stimulating the economy.
Macklem said that with inflation back at two per cent, it’s clear the Bank of Canada’s benchmark rate no longer needs to be in “restrictive” territory, and said past interest rate cuts are starting to provide a lift to household spending.