The Bank of Canada marked a major turning point in its fight against inflation on Wednesday as it lowered its key interest rate for the first time in more than four years, making it the first central bank in the G7 to cut rates.

Governor Tiff Macklem saidthe central bank has more confidence inflation is moving closer to its two per cent target, citing various indicators that suggest price pressures have retreated.

害羞草研究所淚f inflation continues to ease, and our confidence that inflation is headed sustainably to the two per cent target continues to increase, it is reasonable to expect further cuts to our policy interest rate,害羞草研究所� Macklem said in remarks prepared for a morning news conference.

害羞草研究所淏ut we are taking our interest rate decisions one meeting at a time.害羞草研究所�

With the quarter-percentage-point cut, the central bank害羞草研究所檚 key interest rate now stands at 4.75 per cent.

Macklem and senior deputy governor Carolyn Rogers delivered the news while wearing Edmonton Oilers pins, a nod to the Canadian hockey team heading to the NHL finals later this week. Like the Oilers害羞草研究所� ascent to the Stanley Cup finals, the Bank of Canada害羞草研究所檚 rate cut has given Canadians something to cheer for.

While the Wednesday rate cut opened a new chapter for the Bank of Canada, the governor faced questions about whether the central bank would cut again at its July meeting. Macklem urged the room of reporters to be patient.

害羞草研究所淟et害羞草研究所檚 enjoy the moment,害羞草研究所� he said.

Meanwhile on Parliament Hill, federal Liberals celebrated the news.

After attending the Liberals害羞草研究所� weekly caucus meeting, Finance Minister Chrystia Freeland took the microphone to echo Macklem害羞草研究所檚 comments that the rate cut was a moment to enjoy.

害羞草研究所淐anada 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,害羞草研究所� she said.

Conservatives, on the other hand,were in no celebratory mood as they argued the rate cut would do little to help Canadians.

害羞草研究所淭he NDP-Liberal government cannot declare victory as a result of this tiny rate cut because millions of Canadians continue to suffer as a result of their policies,害羞草研究所� Tories said in a news release.

害羞草研究所淭his 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.害羞草研究所�

With inflation down significantly and the economy stalling, most forecasters believed it was the right time for the central bank to begin lowering borrowing rates.

害羞草研究所淭his was largely as expected, but I must say, it was not a certainty by any means that the Bank of Canada was going to cut,害羞草研究所� said Douglas Porter, BMO害羞草研究所檚 chief economist.

害羞草研究所淭his is, after all, the first time that the bank has cut with Mr. Macklem as governor.害羞草研究所�

Although the governor didn害羞草研究所檛 speculate on what the Bank of Canada might do at its next rate decision, Porter took his comments as a sign the central bank may cut again in July.

害羞草研究所淲hat surprised me is that they very clearly have left the door open for a possible follow-up rate cut in July, a little bit more open than I would have assumed,害羞草研究所� he said.

The Bank of Canada will have inflation data for both May and June to consider before its next interest rate decision scheduled for July 24.

Canada害羞草研究所檚 annual inflation rate has steadily declined in recent months, reaching 2.7 per cent in April.

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.

A quarter-percentage-point rate cut won害羞草研究所檛 turn things around for the economy on its own, but TD害羞草研究所檚 director of economics, James Orlando, said it paves the way for more rate cuts in the coming months.

害羞草研究所淚t害羞草研究所檚 the start of what害羞草研究所檚 likely going to be an easing cycle for the Bank of Canada. So it害羞草研究所檚 not just about today害羞草研究所檚 cut,害羞草研究所� Orlando said.

TD expects the Bank of Canada to lower its key interest rate to 4.25 per cent by the end of the year.

The rate decision puts the Bank of Canada ahead of other central banks in the Western world in cutting interest rates, including the U.S. Federal Reserve.

When asked how much the Bank of Canada can diverge from its peers, Macklem said that it doesn害羞草研究所檛 need to walk in lockstep with the Fed.

害羞草研究所淭here are limits to how far we can diverge from the United States, but we害羞草研究所檙e not close to those limits.害羞草研究所�

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