The Bank of Canada's governing council lowered the policy rate to 4.75 per cent from 5 per cent on Wednesday.Chris Wattie/Reuters
The Bank of Canada lowered its benchmark interest rate for a fourth consecutive time on Oct. 23, reducing its trend-setting policy rate by half a percentage-point to 3.75 per cent.
“We took a bigger step today because inflation is now back to the 2-per-cent target and we want to keep it close to the target,” Bank of Canada Governor Tiff Macklem said in a press conference after the Oct. 23 rate announcement. “We need to stick the landing.”
The Bank of Canada was the first G7 central bank to start easing monetary policy earlier this year. It cut its benchmark interest rate by a quarter-percentage-point on June 5 – for the first time in four years – followed by another quarter-percentage-point rate cut in July.
In March, 2020, the central bank slashed its benchmark interest rate to a low of 0.25 per cent in response to the COVID-19 pandemic. It kept the policy rate at rock-bottom for two years, then started raising it rapidly to tackle runaway inflation. Between March, 2022, and July, 2023, the central bank raised rates 10 times, bringing the policy rate to 5 per cent, where it remained since last summer until the bank started to cut rates.
Here’s a timeline of the key events.
March 2020
BoC slashes key rate in response to pandemic
The Bank of Canada cuts its benchmark overnight interest rate from 1.75 per cent to 0.25 per cent in three quick moves in March, 2020, to help cushion the impact of the COVID-19 pandemic on the Canadian economy. It also starts buying huge amounts of financial assets, mainly Government of Canada bonds, to support markets and hold down interest rates. This is known as quantitative easing, or QE.
POLICY INTEREST RATE: 0.25%
October 27, 2021
BoC ends QE
After slowing its bond purchases through 2021, the central bank stops expanding its holdings of federal government bonds, bringing QE to a close. Over the previous 18 months, the central bank’s holdings of GoC bonds grew to more than $430-billion from around $80-billion.
March 2, 2022
BoC starts rate-hike campaign
With inflation running out of control, the bank raises its policy interest rate to 0.5 per cent from 0.25 per cent, kicking off a historic monetary policy tightening cycle. Inflation hit 5.7 per cent that February, almost three times the BoC’s 2-per-cent target.
POLICY INTEREST RATE: 0.50%
April 13, 2022
BoC delivers first oversized rate hike in decades
The bank raises its policy rate by half a percentage point to 1 per cent, the first oversized rate hike in decades. Central bankers typically move in quarter-point increments, so this marks an aggressive step forward in the BoC’s campaign against inflation. It also starts reducing its holdings of government bonds, a process known as quantitative tightening, or QT.
POLICY INTEREST RATE: 1.00%
July 13, 2022
BoC raises policy rate by a full percentage point
The bank raises its benchmark rate by a full percentage point: four times the size of a typical rate hike and the largest move since 1998. The move catches investors off guard, and shows how far monetary policy makers will go to tame inflation, which hit a four-decade high of 8.1 per cent that June.
POLICY INTEREST RATE: 2.50%
January 25, 2023
BoC delivers eighth rate hike, signals pause
The bank increases interest rates for the eighth consecutive time, lifting its policy rate by a quarter-percentage-point to 4.5 per cent. At the same time, it announces a “conditional pause” to further monetary policy tightening. Markets interpret this as the end of the rate-hike cycle.
POLICY INTEREST RATE: 4.50%
March 8, 2023 and April 12, 2023
BoC holds policy rate steady
The bank keeps its policy rate at 4.5 per cent on March 8, the first stand-pat rate decision in more than a year. It also holds rates steady on April 12, although Governor Tiff Macklem warns that the bank could restart rate hikes if inflation doesn’t fall as quickly as expected.
POLICY INTEREST RATE: 4.50%
June 7, 2023
BoC ends its conditional pause
The bank ends its “conditional pause” with a quarter-point increase that brings the policy rate to a 22-year high of 4.75 per cent. This is prompted by surprisingly strong economic activity, a jump in home prices and an uptick in inflation.
POLICY INTEREST RATE: 4.75%
July 12, 2023
BoC hikes a final time
The bank raises its policy rate to 5 per cent and warns that the downward trend in inflation could stall. It publishes an updated forecast showing the rate of inflation would not return to 2 per cent until the middle of 2025 – two quarters later than previously forecast.
POLICY INTEREST RATE: 5.00%
September, 2023 to March, 2024
BoC remains in a holding pattern
The bank holds the policy rate at 5 per cent through five consecutive decisions. It says interest rates are high enough to bring down inflation, but they need more time to work.
April 2, 2024
BoC signals rate cuts are on the table
The bank keeps its policy interest rate at 5 per cent for the sixth consecutive time and offers no timeline for rate cuts. But Governor Tiff Macklem says he is more confident inflation is heading back to the bank’s target and says a June rate cut is “within the realm of possibilities.”
June 5, 2024
BoC cuts interest rate
The bank 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. The central bank’s governing council lowered the policy rate to 4.75 per cent from 5 per cent.
POLICY INTEREST RATE: 4.75%
July 24, 2024
BoC cuts key rate to 4.5%, tees up additional easing
The bank lowers its benchmark interest rate to 4.5 per cent – for the second consecutive time – in a dovish rate announcement that places new emphasis on downside risks to economic growth and tees up additional rate cuts in 2024.
POLICY INTEREST RATE: 4.5%
September 4, 2024
BoC lowers benchmark interest rate for third consecutive time
The Bank of Canada lowers its benchmark interest rate for a third consecutive time, reducing its trend-setting policy rate to 4.25 per cent from 4.5 per cent. The bank also reiterates that economic growth needs to pick up so that inflation doesn’t fall too much, paving the way for additional rate cuts in the coming months.
POLICY INTEREST RATE: 4.25%
Oct. 23, 2024
BoC cuts its key interest rate by a half-point to 3.75%
The Bank of Canada delivers an oversized interest-rate cut, lowering the benchmark policy rate by half a percentage-point to 3.75 per cent, and said that its fight with inflation is almost over. This is the fourth consecutive cut since June and follows three quarter-point moves.
POLICY INTEREST RATE: 3.75%