The Bank of Canada cut its benchmark interest rate by a quarter-percentage-point, lowering borrowing costs for households and businesses for the first time in four years and marking a turning point for the Canadian economy after the biggest inflation and interest-rate shock in decades.
It could also breath life back into the Canadian real estate market, which has stagnated over the past two years as would-be buyers have had trouble qualifying for mortgages and sellers have held off listing due to uncertainty about the trajectory of the market. The campaign appears to have worked, aided by a decline in global commodity prices and improving supply chains. After hitting a peak of 8.1 per cent in the summer of 2022, annual consumer price index inflation fell below 3 per cent at the start of this year and hit 2.7 per cent in April.
Still, the process of disinflation has gone more smoothly than many economists expected. The Canadian economy has not fallen into a recession and mortgage delinquencies remain low. Mr. Macklem noted that economic growth, led by consumer spending, picked up in the first quarter after stalling last year – albeit less than the central bank and private sector had expected.