The Bank of Canada has reduced its overnight rate by 25 basis points to 4.75%, a first since the pandemic began. This move comes after the rate was held at 5% since July of the previous year. The rate hikes started in March 2022 in response to higher-than-expected inflation caused by pandemic stimulus and global supply chain disruptions.
Governor Tiff Macklem noted that sufficient evidence now suggests underlying inflation is easing sustainably. The current inflation rate dropped to 2.7% in April from 2.9% in March. Despite a 1.7% economic growth in the first quarter of 2024, which was lower than expected, employment rose by 90,000 in April, mainly in part-time jobs.
Macklem emphasized the importance of not reducing rates too quickly to avoid jeopardizing inflation control progress, noting that future rate decisions will be assessed meeting by meeting. The next rate announcement is set for July 24.
