Canada Cuts Interest Rates for Fourth Time as Inflation Drops Below Target

In a surprising move, the Bank of Canada announced its fourth consecutive interest rate reduction on Wednesday, dropping the key rate by 50 basis points to 3.75%.

This significant cut, the largest in over four years, reflects a decline in inflation, which fell to 1.6% in September, below the bank’s target of 2%.

After previously raising rates to combat soaring prices, the central bank has shifted its approach since June, implementing a total of 75 basis points in cuts.

During the news conference following the announcement, Governor Tiff McLem expressed optimism, stating that Canadians could feel relieved as the long battle against inflation is finally showing positive outcomes.

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Despite these cuts, economic indicators remain subdued, with weak demand, sluggish business sales, and low consumer confidence hindering growth. McLem is hopeful that the latest rate adjustment will stimulate demand and encourage economic activity.

Meanwhile, the U.S. Federal Reserve has also begun a rate-cutting cycle, prompting speculation about a possible significant cut in December.

Kosta Gushterov