The Bank of Canada has reduced its key interest rate for the third consecutive time, now sitting at 4.25%. This decision comes as inflation continues to ease, with Bank of Canada Governor Tiff Macklem indicating that further rate cuts could be on the horizon if inflation continues to follow expectations.
While this gradual approach was anticipated, some experts argue that larger cuts are necessary to stimulate economic growth. Despite the slight economic growth of 2.1% in the second quarter, unemployment remains high, particularly among youth and newcomers to Canada. Macklem acknowledged that the economy has not yet fully recovered, and future rate decisions will depend on incoming data.
For Canadians, this rate cut will primarily affect those with variable-rate mortgages, but the broader economy may take longer to feel the impact. Some business owners, like Boaz Rachamim of Eisenbergs Sandwich Co., are holding off on expansion plans, finding the current rate cut too small to make borrowing affordable.
Overall, the rate cut is seen as a positive step, but many believe more aggressive cuts are needed to boost the economy and lower borrowing costs across the board.
