Emmanuel OchayiCanada Cuts Interest Rates Amid Inflation Victory
Canada’s central bank has reduced its key interest rate to 3.75%, marking a critical moment in its battle against inflation. After maintaining a rate of 5.0% for nearly a year, the Bank of Canada has lowered the rate following three consecutive quarter-point cuts.
Governor Tiff Macklem emphasized the success in managing inflation. “We took a bigger step today because inflation is now back to the 2% target, and we want to keep it close to the target,” Macklem told reporters.
Join our WhatsApp ChannelThis move is the first of its kind among G7 nations, reflecting Canada’s aggressive approach to tackling inflation since the post-pandemic surge in prices.
Maintaining Stability in a Changing Economy
The central bank acknowledged that it might reduce rates further if the economy continues on its current path. However, Macklem cautioned that there are still risks. “We are now equally concerned about inflation coming in higher or lower than expected,” he said.
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Analysts have welcomed the cut, with CIBC Economics’ Avery Shenfeld stating, “This outsized rate cut was a no-brainer. The statement plants a victory flag in the battle against inflation.”
James Orlando, a senior economist at TD Bank, noted, “Rates are still way too high given the state of the economy,” predicting further reductions through 2025.
Relief for Borrowers
For many Canadians, the rate cut provides much-needed relief, especially for homeowners with variable-rate mortgages. The high cost of housing has been a top concern for citizens as interest rates surged in response to rising inflation.
Macklem acknowledged the financial strain Canadians faced due to the pandemic-driven inflation crisis. “Canadians can now breathe a sigh of relief,” he said. “It has been a long fight… but it has worked. We are coming out the other side.”
The bank’s next decision on rates will come in December, but Macklem stressed, “I’m not going to handicap the next move,” underscoring that future actions will be guided by updated data.
With inflation back to its 2% target, the focus now shifts to maintaining stability and preventing any resurgence of inflationary pressures.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
