With annual inflation now close to 2%, the central bank says its mission has shifted from reducing inflation to keeping it around the inflation target.
“We took a big step today because inflation is now back to the 2 percent target and we want to keep it close to that target,” Governor Macklem said in his opening statement.
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Canada's inflation rate eased to 1.6% in September, bolstering forecasters' expectations of a major deflation. Big cuts mean the rate can be lowered quickly.
Wednesday marked the fourth consecutive rate cut by the central bank since June. Its policy rate now stands at 3.75%, down from 5%.
The Bank of Canada attributed the slowdown in inflation to the reduction of shelter prices, to supply the transient demand in the economy and the decline in the price of oil in the world.
It now predicts that inflation will remain around the 2% target throughout the projection horizon, extending to 2026.
High interest rates have sent shockwaves through the Canadian economy, slowing growth and weakening the labor market.
The central bank says in its monetary policy report that although layoffs remain stable, businesses have withdrawn from hiring, which has disproportionately affected young people and new entrants.
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