Governor Tiff Macklem says the central bank has more confidence inflation is moving closer to its two per cent target, citing various indicators that suggest price pressures have retreated.
The rate cut Wednesday also opened a new chapter for the Bank of Canada, which has been preoccupied with wrestling inflation down over the last two years. "Canada is the first G7 country where interest rates have been lowered. Our economic plan is working and that is really welcome news for Canada and Canadians," she said.
"This rate cut is not a mark of success for Justin Trudeau but rather a reminder that millions of Canadians will be forced to renew their mortgages at much higher rates thanks to his inflationary policies." The Canadian economy has also weakened under the weight of high interest rates. Economic growth in the first quarter came in lower than forecasters expected, and the unemployment rate has steadily risen, reaching 6.1 per cent in April.
TD expects the Bank of Canada to lower its key interest rate to 4.25 per cent by the end of the year.