Ottawa: The Bank of Canada has reduced its key interest rate to 4.75 per cent, the first cut since March 2020. Governor Tiff Macklem cited significant progress in combating inflation and increased confidence that it will continue to approach the bank’s two per cent target. The inflation rate recently dropped to 2.7 per cent, and core inflation measures have also eased.

The decision was anticipated by economists, especially after the economy grew by only 1.7 per cent in the first quarter of the year. The Bank of Canada had maintained the rate at five per cent since July 2023 following a series of aggressive hikes.

Macklem emphasized a cautious approach, indicating that further cuts would depend on continued inflation improvements. The rate cut offers relief to variable rate mortgage holders like Joseph Hopkinson, whose monthly payments had surged dramatically since purchasing a home in June 2022.

“We don’t want monetary policy to be more restrictive than it needs to be,” Macklem said, while warning against lowering rates too quickly.

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