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The Bank of Canada cut its key interest rate by 25 basis points in a widely expected move on Wednesday. In its second-last announcement of the year, the bank decided to give more support to the economy by lowering the rate to 2.25 per cent from 2.5 per cent. In his prepared remarks, Bank of Canada governor Tiff Macklem stressed that U.S. tariffs and trade uncertainty have weakened the Canadian economy. “Canadian businesses and households are feeling the consequences of increased U.S. protectionism,” he said. “It is difficult, and ongoing uncertainty is compounding the difficulty.” But the governor suggested that, assuming growth and inflation evolve as forecasted, the bank isn’t considering further cuts for now. “Governing council sees the current policy rate at about the right level to keep inflation close to two per cent while helping the economy through this period of structural adjustment,” he said. Macklem emphasized that the central bank already lowered its key rate by 50 basis points over the last two announcements and by 100 basis points since the start of the year. Despite an uptick in inflation in September, experts surveyed by the Star last week correctly predicted the central bank would cite rising unemployment and reduced business investment as factors behind its decision to cut. “The reality is that the economy is in need of support,” Desjardins economist Royce Mendes wrote in a note to clients on Monday. “Outside of the pandemic, the unemployment rate is standing at its highest level since 2016.” Macklem said that while inflation is “slightly higher” than expected, policymakers believe inflationary pressures will come down in the months ahead. The announcement will be followed by a press conference held by Macklem and senior deputy governor Carolyn Rogers. Also on Wednesday, the Bank of Canada published its quarterly report with projections for inflation and growth in the Canadian economy as well as an assessment of economic risks. This is a developing story.
