The Bank of Canada cut its key interest rate for the first time in more than four years today, marking a major turning point in its fight against inflation.

The central bank’s key interest rate now stands at 4.75 per cent, down from five per cent.

In prepared remarks ahead of a press conference, governor Tiff Macklem says the Bank of Canada has more confidence inflation is moving closer to the central bank’s two per cent target, citing various indicators that suggest price pressures have retreated.

Macklem says if inflation continues to slow, it is “reasonable” to expect the central bank will continue lowering its policy rate, but those decisions will be taken “one meeting at a time.”

Economists were widely expecting the Bank of Canada to begin lower its policy rate today, given the marked slowdown in inflation and clear signs that high interest rates are stalling economic growth.

Today’s announcement puts the Bank of Canada ahead of other central banks in the Western world in cutting interest rates, including the U.S. Federal Reserve.

This report by The Canadian Press was first published June 5, 2024.