The Bank of Canada (BOC) has finally begun cutting interest rates after a long four year gap in which time is has jacked up the economy-killing rates to 5 percent. After much hype, BOC cut its overnight rate by 25 basis points, a move not seen since the beginning of the pandemic, which puts the policy rate at 4.75 per cent, down from the 5 per cent it has been sitting at since July of last year. “We’ve come a long way in our fight against inflation,” said Bank of Canada Governor Tiff Macklem, during prepared remarks in Ottawa. “And our confidence that inflation will continue to move closer to the 2 per cent target has increased over recent months.” It’s not known whether the cut is really due to inflation getting closer to BOC’ 2 percent range  which with sky-high gas, grocery and mortgage costs doesn’t really seem to be under control. But obviously there are other forces, largely the tanking Liberal government which needs any good news for Canadians to stay competitive in next year’s election where they face a dire political fate if things don’t change or Prime Minister Justin Trudeau doesn’t resign and party gets new leader to see a fresh mandate.

By R. Paul Dhillon – Editor DESIBUZZCanada

TORONTO - The Bank of Canada (BOC) has finally begun cutting interest rates after a long four year gap in which time is has jacked up the economy-killing rates to 5 percent.

After much hype, BOC cut its overnight rate by 25 basis points, a move not seen since the beginning of the pandemic, which puts the policy rate at 4.75 per cent, down from the 5 per cent it has been sitting at since July of last year.

The bank began raising its key interest rate in March of 2022, following larger-than-expected inflation numbers that followed a period of pandemic stimulus and disrupted global supply chains.

 “We’ve come a long way in our fight against inflation,” said Bank of Canada Governor Tiff Macklem, during prepared remarks in Ottawa. “And our confidence that inflation will continue to move closer to the 2 per cent target has increased over recent months.”

It’s not known whether the cut is really due to inflation getting closer to BOC’ 2 percent range  which with sky-high gas, grocery and mortgage costs doesn’t really seem to be under control. But obviously there are other forces, largely the tanking Liberal government which needs any good news for Canadians to stay competitive in next year’s election where they face a dire political fate if things don’t change or Prime Minister Justin Trudeau doesn’t resign and party gets new leader to see a fresh mandate.

BOC says inflation rate was at 2.7 per cent in April, down from 2.9 per cent in March of this year. The economy grew by 1.7 per cent in the first quarter of 2024, below what the bank had initially forecasted.

“Growth has resumed in the first quarter, we’ll certainly be looking at our growth trajectory going forward,” Macklem said. “So far it is looking like a soft landing; plane hasn’t landed yet so we’re not cheering yet, but I would say the runway is in sight, but we still need to land this.”

However, Macklem warned that risks to the inflation outlook remain and that the decision on further rate cuts will be made one meeting at a time, reported CTV News.

“But if we lower our policy interest rate too quickly, we could jeopardize the progress we’ve made,” said Macklem. “Further progress in bringing down inflation is likely uneven and risks remain.”

Those risks include geopolitical tensions, but also rising house prices.

Speaking to reporters in Ottawa, Finance Minister Chrystia Freeland welcomed the news of a rate cut and credited her own government’s fiscal plan.

“We have been working really hard to create the economic conditions which would make it possible for the bank to lower rates and today we see the fruit of that hard work,” she said. “Canada is the first G7 country where interest rates have been lowered. Our economic plan is working and that is really welcome news for Canada and Canadians.”

The next rate announcement is scheduled for July 24.

With News Files from CTV News