Bank of Canada Cuts Rates to 4.25%

The Bank of Canada has reduced its key interest rate for the third consecutive time by 25 basis points to 4.25%, citing continued easing in inflationary pressures and a need to support economic growth. Governor Tiff Macklem indicated that further cuts are likely if inflation continues to decelerate, although there are concerns that economic weakness could lead to inflation falling too much below the target. The central bank noted that while the economy grew by 2.1% in the second quarter, preliminary data suggests a slowdown in June and July. Inflation has moderated to 2.5% in July, approaching the Bank's 2% target, but high costs for shelter and certain services remain a concern. Financial markets are predicting additional rate cuts in the coming months, with some economists even suggesting a potential 50 basis-point cut if economic conditions worsen. The Bank will reassess its forecasts and policy stance in its next decision on October 23.