Bank of Canada cuts key interest rate to 4.75% | CBC News (2024)

Business

The Bank of Canada has lowered its key interest rate to 4.75 per cent,marking the bank's first rate cut sinceMarch 2020.

'We've come a long way in the fight against inflation,' said BOC governor Tiff Macklem

Bank of Canada cuts key interest rate to 4.75% | CBC News (1)

Jenna Benchetrit · CBC News

·

Bank of Canada cuts key interest rate to 4.75% | CBC News (2)

Bank of Canada cuts interest rate, hints there could be more

1 day ago

Duration 3:27

Citing cooling inflation, the Bank of Canada has cut its key interest rate from five to 4.75 per cent. Bank governor Tiff Macklem also hinted that more rate cuts could follow.

The Bank of Canada has lowered its key interest rate to 4.75 per cent,marking the bank's first rate cut sinceMarch 2020.

Bankgovernor Tiff Macklemsaid in openingremarks that the bank's monetary policy no longer needs to be as restrictive.

"We've come a long way in the fight against inflation. And our confidence that inflation will continue to move closer to the twoper centtarget has increased over recent months," Macklem said.

Economists were largely expecting the move. Theinflation rate has moved closer to the bank's twoper cent goal in recent months, coming in at 2.7 per cent in April,with the bank's preferred core measures of inflation also easing throughout the spring.

WATCH | Tiff Macklem explains why the central bank cut rates:

Bank of Canada cuts key interest rate to 4.75% | CBC News (3)

Tiff Macklem explains why the Bank of Canada trimmed its key interest rate

2 days ago

Duration 2:45

Bank of Canada governor Tiff Macklem said confidence that inflation would move closer to the bank's two per cent target has increased in recent months, as he outlined the reasons behind the move to trim the bank's key interest rate to 4.75 per cent.

Meanwhile, quarterlyGDP numbers released last weekwere weaker than expected: the economy grew by 1.7 per cent during the first three months of the year, increasing the likelihood of a cut.

After a cycle of aggressive interest rate hikes, the Bank of Canada last hiked the rate to fiveper cent in July 2023 and held it there until Wednesday's cut.

RBC, Scotiabank, BMO, TD Bank and CIBChad cut their prime lending rates to 6.95 per cent from7.20 per cent as of 3 p.m. ET on Wednesday.

Lowering rates too quickly could jeopardize progress: Macklem

But Macklem stressed that the Bank of Canada is going to take things "one meeting at a time."

Canadians can reasonably expect more cutsso long as inflation continues to ease, and the bank maintains its confidencethat inflation is steadilyapproaching the bank's twoper cent goal, Macklem said.

"We don't want monetary policy to be more restrictive than it needs to be to get inflation back to target. But if we lower our policy interest rate too quickly, we could jeopardize the progress we've made," he said.

WATCH | Why the Bank of Canada is taking things 'one meeting at a time':

Bank of Canada cuts key interest rate to 4.75% | CBC News (4)

Interest rate decisions will be made 'one meeting at a time,' Macklem says

2 days ago

Duration 1:09

Bank of Canada governor Tiff Macklem, when asked if Canadians can expect to see a further interest rate cut next month, says the timing will depend on incoming data and what that information means for the future path of inflation.

"It's a small cut, but I think a grand gesture," said Royce Mendes, managing director and head of macro strategy at Desjardins. He noted that the Bank of Canada is the first of the G7 central banks to begin cutting rates.

With many homeowners set to renew their mortgages in the next few months, "if the bank had left interest rates high for too long, we could have tipped the economy into an unnecessary recession,"he noted.

"They want to get rates down, but they'll do it in a gradual way, and it'll probably be a less pronounced rate-cutting cycle than we've seen in prior decades, because we're not in the midst of a recession. What we're trying to do right now is fend one off."

  • Inflation cooled to 2.7% in April as food price growth slowed
  • Canada's GDP grew less than expected. Will a rate cut follow?

CIBC economist Andrew Granthamwrote in a note to clients that "with core inflation decelerating and growth remaining tepid there wasn't a good excuse to not begin the process of moving rates lower today."

He expects the Bank of Canada to lower interest rates by another 25 basis points at its next meeting, on July 24, with another two cuts after that before the end of the year.

Tu Nguyen, an economist with RSM Canada, noted that a single rate cut won't revive the economy overnight.

But she said it"signals to consumers and businesses the beginning of a gradual and orderly rate cut cycle that will unfold over the next year and a half. Recovery can begin now and hit full force in 2025."

Bank of Canada cuts key interest rate to 4.75% | CBC News (5)

Saving money with every cut

The rate cut is positive news for variable rate mortgage holders like Joseph Hopkinson, 41, asales consultant in Toronto.

Hopkinson and his wife bought a semi-detached house in June 2022. At the time, their variable mortgage payment was $3,600 a month — but that figure has since skyrocketed to $5,793.

"We had to start being really thoughtful about what we were spending money on, which I think was the Bank of Canada's intent," Hopkinson told CBC News. "They wanted us to stop spending discretionary funds."

  • Calculate how your mortgage will be affected as interest rates change
  • U.S. Federal Reserve holds interest rate, saying it will take 'longer than expected' to start cutting

That forced Hopkinson, his wife and their two kids to rethink their spending — from groceries to car repairs to extracurricular sports.

"You go into survival mode, you really start thinking about what's really important. And at the end of the day, of all the bills I'm going to pay, I'm going to pay my mortgage," he said.

A quarter point cut like the one that was handed down Wednesday would have a tangible impact on the family's budget, according to Hopkinson.

"One rate cut for our family would be approximately $142 [per month], which is about a week of groceries for our family of four."

ABOUT THE AUTHOR

Bank of Canada cuts key interest rate to 4.75% | CBC News (6)

Jenna Benchetrit

Journalist

Jenna Benchetrit is a senior writer with the business content unit at CBC News. She has also covered entertainment and education stories. A Montrealer based in Toronto, Jenna holds a master's degree in journalism from Toronto Metropolitan University. You can reach her at jenna.benchetrit@cbc.ca.

    With files from Nisha Patel and Laura MacNaughton

    Corrections and clarifications|Submit a news tip|

    Related Stories

    • U.S. Federal Reserve holds interest rate, saying it will take 'longer than expected' to start cutting
    • Inflation cooled to 2.7% in April as food price growth slowed
    • Canada's GDP grew less than expected. Will a rate cut follow?

    Bank of Canada cuts key interest rate to 4.75% | CBC News (7)

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    Bank of Canada cuts key interest rate to 4.75% | CBC News (2024)

    FAQs

    Did the Bank of Canada cut interest rates? ›

    The Bank of Canada has lowered its key interest rate to 4.75 per cent, its first rate cut since March 2020. CBC's Dwight Drummond speaks with Moshe Lander, a Concordia University senior lecturer in economics, about what that means for the average person.

    What is the Bank of Canada key interest rate today? ›

    The Bank of Canada has lowered its key interest rate to 4.75 per cent, marking the bank's first rate cut since March 2020.

    What is the next Bank of Canada rate announcement? ›

    The next scheduled date for announcing the overnight rate target is July 24, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

    What is Canada's prime interest rate? ›

    The prime rate in Canada today, June 9, 2024, is currently 6.95%. The prime rate, also known as the prime lending rate, is the annual interest rate Canada's major banks and financial institutions use to set interest rates for variable loans and lines of credit, including variable-rate mortgages.

    What does the interest rate cut mean? ›

    Bottom line: If your lender's prime rate decreases in response to the BoC's interest rate cut, as a variable rate mortgage holder you will benefit in one of two ways: Either your regular mortgage payment will decrease, or more of your mortgage payment will be directed toward your mortgage principal, meaning you could ...

    What is the TD prime rate today? ›

    TD Mortgage Prime Rate is 7.10%

    APR is rounded to three decimal places.

    What is the best interest rate in Canada? ›

    The Best Interest Rates on High-Interest Savings Accounts Currently Available in Canada*
    • Tangerine Savings Account – 6% for five months, then 0.70% after that. ( ...
    • Simplii Financial High Interest Savings Account – 5.90% for five months, then 0.40% after that. ...
    • 4.20% – Saven Financial High Interest Savings (Ontario only)

    What is Canada's average Bank interest rate? ›

    Basic Info. Canada Bank Rate is at 5.25%, compared to 5.25% the previous market day and 4.75% last year. This is higher than the long term average of 4.48%.

    What are key interest rates? ›

    The key rate is the interest rate set by the Bank of Canada to regulate short-term borrowing between financial institutions. It is also the primary tool used by the Bank of Canada to conduct monetary policy.

    Where can I get 7% interest on my money? ›

    Why Trust Us? As of June 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.

    Are interest rates expected to go down in 2024 in Canada? ›

    It seems unlikely that interest rates will increase anytime soon. Most experts predict that we will see multiple rate cuts in 2024. The Bank of Canada Governing Council has agreed that monetary policy no longer needs to be restrictive as they are confident that inflation will continue moving in the right direction.

    What is the highest interest rate in Canada history? ›

    Prime Rate In Canada Since 1980. Source: Bank of Canada. Average prime rate: 6.85%. Highest prime rate: 22.75%, August 12 to September 2, 1981.

    What is the US prime rate today? ›

    What Is the Current Prime Rate? As of May 20, 2024, the current prime rate is 8.50%, according to The Wall Street Journal's Money Rates table.

    What is the mortgage rate in Canada? ›

    The average insured 5-year variable mortgage rate from big banks in Canada is 6.69% , while nesto's lowest 5-year variable mortgage rate in Canada is 5.65% . The average insured 3-year fixed mortgage rate from big banks in Canada is 6.02% , while nesto's lowest 3-year fixed mortgage rate in Canada is 5.24% .

    What is the forecast for interest rates in Canada? ›

    As of June 2, the BoC prime rate is at 5% and markets are forecasting: July 2024: 4.75% October 2024: 4.50% March 2025: 4.25%

    Why did Canada lower interest rates? ›

    Canadian banking officials cited improvement in inflation as the reason for the cut but acknowledged that the country couldn't move too far away from the U.S. on interest rates.

    Who controls the Bank of Canada interest rate? ›

    The Governing Council is made up of the Governor, the Senior Deputy Governor and the Deputy Governors. The Governing Council's main tool for conducting monetary policy is the policy interest rate. This rate is normally set on eight fixed announcement dates per year.

    What was the lowest interest rate in Canada? ›

    The lowest 1-Year fixed mortgage rate in history was 2.79% in 2021, and the highest was 21.75% in 1981.

    What does a lower interest rate mean? ›

    When interest rates are high, it's more expensive to borrow money; when interest rates are low, it's less expensive to borrow money. Before you agree to a loan or sign up for a new credit card, it's important to make sure you completely understand how the interest rate will affect the total amount you owe.

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