OTTAWA (Reuters) – The Bank of Canada (BoC) cut its key rate by 25 basis points to 4.75% on Wednesday, the first cut in four years, while paving the way for further monetary easing measures if inflation continued to slow.
The BoC, one of the first central banks to begin the current cycle of monetary tightening in 2022 to combat persistent inflation, said that indicators appeared increasingly positive.
“With more and more sustained signs of easing in underlying inflation, monetary policy no longer needs to be as restrictive,” Governor Tiff Macklem said at a press conference following the announcement of the decision.
The BoC’s key rate cut, expected by operators, comes after similar interventions by the Swedish and Swiss central banks, with the European Central Bank (ECB) most likely to follow suit on Thursday.
Inflation in Canada has slowed this year to 2.7% in April, its lowest level in three years. Despite inflation below 3% for four consecutive months, it remains above the 2% target set by the BoC.
“If inflation continues to slow and the data continues to reinforce our confidence that it is heading well towards the 2% target, it is reasonable to expect further policy rate cuts,” Tiff said. Macklem.
“But we take our rate decisions one at a time,” said the BoC governor, who has in the past made cautious comments on rates.
The BoC’s next rate decision meeting is scheduled for July 24, when it will also release its latest quarterly forecasts.
(Report by Promit Mukherjee and David Ljunggren, Mathias de Rozario, edited by Augustin Turpin)
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