THE CANADIAN PRESS/Adrian Wyld
Bank of Canada Governor Tiff Macklem responds to a question during a news conference on October 25, 2023 in Ottawa.

The Bank of Canada lowered its benchmark policy interest rate by a quarter percentage point amid signs that inflation is easing off.

The central bank lowered its overnight rate by 0.25 percentage points to 4.5 per cent, according to a statement on its website. Today’s move marks the second rate cut in the past six weeks.

Policy makers didn't provide explicit forward guidance on when they will cut rates again, saying only their next decision will be informed by “incoming information” — which means incoming inflation data. They also expressed concern that despite easing inflation, price pressures continue to persist in some parts of the economy, like housing. All this suggests a very data-dependent central bank, which effectively means a cautious central bank.

In his opening remarks at a press conference, Macklem said that it is “reasonable” to expect further cuts in the policy rate as long as inflation continues to ease toward the central bank’s 2 per cent target. Economists anticipate rates will fall by at least another full percentage point by the end of next year.

"The timing will depend on how we see these opposing forces playing out. In other words, we will be taking our monetary policy decisions one at a time,” Macklem said.

For borrowers, Wednesday’s cut means prime lending rates offered by commercial banks should fall to about 6.75 per cent.

Here are some highlights from the press conference and the bank’s new batch of quarterly forecasts:

Macklem appears to be much more confident that inflation is on course toward 2 per cent. In fact, he spoke about the possibility that inflation could fall below the target should the economy not rebound
We are seeing a pivot toward worrying more about growth than inflation. Macklem was explicit about this: “The downside risks are taking on increased weight in our monetary policy deliberations”
The central bank expects interest rates to keep falling as long as inflation continues to trend toward 2 per cent. At the same time, policy makers are concerned about continued price pressures in the housing market and said they aren’t on a pre-determined path to cutting interest rates