Canada central bank cuts key lending rate to 4.25%
Analysts, who are predicting more rate cuts by year’s end, expressed some surprise that the bank was not more aggressive this round
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THE Bank of Canada on Wednesday (Sep 4) lowered its key lending rate by a further 0.25 percentage points, to 4.25 per cent, amid signs of a softening economy and lower inflation.
It is the third consecutive cut by the central bank, after the economy showed signs in June and July of slowing, and inflation fell to 2.5 per cent – within the bank’s target range.
The bank had previously maintained the rate at 5.0 per cent for nearly a year – its highest level in two decades.
“With continued easing in broad inflationary pressures, (the bank’s) Governing Council decided to reduce the policy interest rate by a further 25 basis points,” it said in a statement.
“Excess supply in the economy continues to put downward pressure on inflation, while price increases in shelter and some other services are holding inflation up,” it added.
Analysts, who are predicting more rate cuts by year’s end, expressed some surprise that the bank was not more aggressive this round.
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“The Bank of Canada went with the more cautious approach of yet another quarter point rate cut, leaving rates still well above where they will have to head to get the economy really moving again now that inflation is less of a threat,” CIBC Economics analyst Avery Shenfeld said in a research note.
He predicted two more 25 basis point cuts this year, en route to a roughly 2.5 per cent rate next year.
Desjardins analyst Royce Mendes predicted a 50-basis-point cut at the bank’s next meeting on October 23, immediately followed by a 25 percentage point cut. AFP
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