Overnight lending rate falls to 4.25% as Bank of Canada makes third consecutive cut

Canada’s central bank has made a third cut to its overnight lending rate this year, lowering borrowing costs for existing and aspiring homebuyers yet again.

In its scheduled September 2024 announcement, the Bank of Canada dropped the target for the overnight lending rate by 25 basis points to 4.25%.

In July, Canada’s Consumer Price Index rose 2.5% year-over-year, increasing at the slowest pace since March 2021. Continued easing of inflationary pressures were a contributing factor of the Bank’s decision to lower interest rates by another 25 basis points.

“Our decision reflects two main considerations. First, headline and core inflation have continued to ease as expected. Second, as inflation gets closer to target, we want to see economic growth pick up to absorb the slack in the economy so inflation returns sustainably to the 2% target. Inflation continues to reflect the push and pull of opposing forces. Overall weakness in the economy continues to pull inflation down. But price pressures in shelter and some other services are holding inflation up,” said Tiff Macklem, Governor of the Bank of Canada, in a press conference with reporters following the announcement.

“If inflation continues to ease broadly in line with our July forecast, it is reasonable to expect further cuts in our policy rate. We will continue to assess the opposing forces on inflation, and take our monetary policy decisions one at a time,” he continued.

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