With annual price growth now around 2%, the central bank says its job has shifted from lowering inflation to maintaining it around the inflation target.
“We took a bigger step today because inflation is now back to the 2% target and we want to keep it close to the target,” Governor Tiff Macklem said in his opening statement.
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Canada’s inflation rate fell to 1.6% in September, solidifying forecasters’ expectations for a larger rate cut. Bigger cuts mean the rate can be lowered faster.
Wednesday marked the central bank’s fourth consecutive interest rate cut since June. Its policy rate now stands at 3.75%, down from a height of 5%.
The Bank of Canada attributes the slowdown in price growth to shelter price inflation easing, supply outpacing demand in the economy and global oil pricing falling.
It’s now forecasting inflation will remain around the 2% target throughout its projection horizon, which extends to 2026.
High interest rates have sent a chill through the Canadian economy, slowing growth and loosening the labour market.
The central bank says in its monetary policy report that while layoffs have remained stable, businesses have pulled back on hiring, which has disproportionately affected young people and newcomers.
