Bank of Canada cuts interest rate, signals more to come if inflation keeps dropping

The Bank of Canada has reduced its key interest rate and hinted at more cuts if inflation continues to fall. The central bank lowered the rate by 0.25 percentage points, bringing it down to 4.75%. This move is aimed at supporting the economy, which has been facing challenges from global uncertainties and slower growth.

The Bank's decision comes as inflation in Canada shows signs of easing. Governor Tiff Macklem stated that while inflation is still above the Bank's target, recent data suggests it is heading in the right direction. The goal is to bring inflation back to the 2% target, which is considered healthy for the economy.

Lowering the interest rate makes borrowing cheaper for businesses and consumers, encouraging spending and investment. This, in turn, can help boost economic activity. However, the Bank of Canada is also cautious about the potential risks of reducing rates too quickly, such as increasing household debt levels.

The Bank's future actions will depend on the inflation trend. If inflation continues to decrease, further rate cuts are likely. Governor Macklem emphasized the importance of monitoring economic indicators closely to ensure that the policy decisions support a stable and growing economy.