The Bank of Canada lowered its key interest rate by half a percentage point today but signalled a slower pace of rate cuts moving forward.

The decision marked the fifth consecutive reduction since June and brings the central bank’s key rate down to 3.25 per cent.

Forecasters were widely expecting the jumbo interest rate cut after the November labour force survey showed the unemployment rate rose to 6.8 per cent.

Governor Tiff Macklem said in his prepared statement that the central bank opted for two large rate cuts in a row because economic growth doesn’t need to be restricted anymore. 

However, he signalled that the pace of cuts will likely slow down.

“The governing council has reduced the policy rate substantially since June, and those cuts will work their way through the economy,” Macklem said.

“With the policy rate now substantially lower, we anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected.”

The bank’s benchmark rate now sits at the upper bound of the neutral rate range.

The neutral rate, which the central bank estimates is somewhere between 2.25 per cent and 3.25 per cent, reflects a theoretical interest rate that will neither help nor hinder economic growth.

Looking ahead, the central bank says it expects economic growth next year to be weaker than previously forecast due to the federal government’s reduction in immigration.

–The Canadian Press–