Amid a falling national inflation rate, the Bank of Canada has delivered a so-called super-sized interest rate reduction.
The Bank on Wednesday cut its key overnight lending rate by 50 basis points to 3.75%. The largest reduction since the Covid-19 pandemic, today’s chop follows on the heels of three consecutive 25-point rate reductions since June and comes as headline inflation has largely now been tamed.
Statistics Canada’s consumer price index last week showed the overall inflation rate up 1.6% on a year-over-year basis in September, down from a 2% gain in August and a slower increase than expected by economists and analysts. It marked the smallest yearly increase in the inflation rate since February 2021 when it came in at 1.1%.
“With inflation now back around the 2% target, (the Bank) decided to reduce the policy rate by 50 basis points to support economic growth and keep inflation close to the middle of the 1% to 3% range,” the Bank said in its rate announcement. It added it expects to cut its policy rate further, provided the Canadian economy performs as expected.