BoC lowers interest rate to 4.5%

Move falls in line with economists' expectations, as inflation shows further signs of cooling

- ANA PEREIRA

Bank of Canada governor Tiff Macklem said more cuts are in the cards if inflation continues to fall in line with forecast

The Bank of Canada cut its key overnight lending rate to 4.5 per cent on Wednesday, but warned it needs to see housing inflation and other price pressures ease for more cuts to follow.

This is the central bank's second cut in a row, following a quarter-percentage-point cut to 4.75 per cent in June the first time in more than four years it had made any cut at all.

Wednesday's move was no surprise to economists and market watchers as the economy has been showing signs of cooling. In June, inflation fell to 2.7 per cent, while unemployment rose to 6.4 per cent.

Bank of Canada governor Tiff Macklem emphasized in a news conference following the announcement that more cuts are in the cards if inflation continues to fall in line with the bank's forecast.

He also expressed concern about underestimating the impact of higher-for-longer rates on economic growth and inflation.

"We need growth to pick up so inflation does not fall too much," said Macklem.