The Bank of Canada trimmed its key overnight lending rate for the third consecutive time on Wednesday.
Widely expected by analysts and economists, today’s 25-basis point reduction puts the Bank’s key rate at 4.25% and comes amid a continued cooling in the national inflation rate. Headline inflation came in at 2.5% in July, creeping ever close to the Bank’s preferred target of 2%.
“If inflation continues to ease broadly in line with our July forecast, it is reasonable to expect further cuts in our policy rate,” Bank of Canada Governor Tiff Macklem said in prepared remarks.
The Bank of Canada rapidly increased its policy rate from 0.25% in March 2022 to 5% in July 2023 before beginning the current easing cycle in June. Headline inflation in Canada reached a 40-year high in 2022, peaking at 8.1% in June.
The continued decline in interest rates will be welcomed by consumers and farmers alike. According to a Statistics Canada farm income report earlier this year, Canadian farmer interest expenses (after rebates) were up 39.1% to $6.9 billion in 2023, due to higher interest rates and a 4.1% increase in national debt levels. It marked the largest increase in farm interest expenses since 1981, when they surged over 50%.
Meanwhile, farm income is headed in the opposite direction. Last week, StatsCan reported national farm cash receipts through the first half of 2024 down 3.2% from the same period in 2023, due to lower crop prices.
