The Bank of Canada cut interest rates for the third time in a row on Wednesday as inflation continued to ease and the focus shifted to economic growth.
This rate cut of a quarter of a percent had been expected by most economists and brought the central bank's benchmark interest rate to 4.25 percent.
The policy rate, which broadly sets borrowing costs across Canada and affects the rates many Canadians receive for mortgages and other loans, has fallen by 75 basis points since the easing cycle began in June.
Annual inflation continued to ease through 2024, with the rate last recorded at 2.5 percent in July.
"If inflation continues to ease across the board in line with our forecast in July, it is reasonable to expect further reductions in our policy rate," Bank of Canada governor Tiff Macklem said in prepared remarks on Wednesday.
Economists and market watchers have noted a change in tone from the Bank of Canada in recent months: less concern over whether the two per cent target will be met, and instead a focus on the downturn in the labor market.
Most economists who spoke to Global News ahead of Wednesday's decision said that with growing confidence that inflation is heading lower, there is no good reason for interest rates to remain at such tight levels.
Macklem reiterated in his statement on Wednesday that the central bank is just as concerned about inflation falling below two percent as it is persistently above target.
"With inflation getting closer to the target, we need to be more vigilant against the risk that the economy is too weak and inflation falls too much," he said.
Macklem said the Bank of Canada's governing council will be "guided by the information received" and the expected impact on inflation forecasts in making a decision on the future direction of interest rates.
