The Bank of Canada announced the first benchmark interest rate cut in four years on Wednesday, dropping the rate by 25 basis points to 4.75 per cent.

The move was widely expected by experts, with economists pointing to a few key indicators — including the inflation rate moving to 2.7 per cent in April and economic growth moving slower than expected at 1.7 per cent in the first quarter — that boosted anticipation of a rate cut.

The Bank of Canada (BoC) began aggressively hiking the key interest rate in 2022 from a low of 0.5 per cent in March in response to rising inflation. The Bank briefly held the rate at 4.5 per cent in March 2023 after economic growth stalled at the end of 2022, but with an uptick in inflation and heightened activity in the housing market, the rate was raised again in June 2023 to 4.75 per cent. After a final raise to 5 per cent in July, the BoC has held the rate for six consecutive announcements.

In BoC governor Tiff Macklem’s opening remarks in the announcement on Wednesday, he noted that they’re confident the inflation rate will continue to move closer to the Bank’s 2 per cent target. “It is reasonable to expect further cuts in our policy interest rate. But we are taking our interest rate decisions one meeting at a time,” he said.

But he cautioned that they don’t want to move too quickly in lowering the policy rate to “jeopardize the hard-won progress” we’ve made.

Macklem wouldn’t specify when further cuts would occur, noting instead that, “If the economy continues to evolve broadly how we expect it and we continue to see a broad easing in inflationary pressures, it is reasonable to expect further cuts in our policy rates. But the timing of those cuts is going to depend on incoming data.”

CIBC deputy economist Benjamin Tal previously told Streets of Toronto that if the BoC were to cut rates in June, it’s likely they would cut again in July and possibly September.

In a note from RBC about the rate cut, they noted that it’s a “positive sign” for new buyers. “While 25 basis points won’t significantly change the game for homebuyers today, the decrease is widely considered to be the start of a trend of lowering rates – and as rates go down, so will mortgage-related costs,” the note read.