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The Bank of Canada considered cutting its key interest rate by just a quarter of a percentage point last month, but opted to take a larger step in the face of a weakening economy and a decline of inflation.

That’s according to the central bank’s summary of deliberations released Tuesday, which details the board of governors’ conversations ahead of the Oct. 23 interest rate announcement.

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The Bank of Canada ultimately opted to cut its interest rate by half a percentage point, bringing its key rate to 3.75 percent.

“Several factors were cited to support this decision. Members were increasingly confident that upward pressures on inflation would continue to diminish, so policy did not need to be so restrictive. says the summary.

“Furthermore, members believed that a larger measure was appropriate given the continued weakness in the labor market and the need for stronger economic growth to absorb excess supply. »

Canada’s inflation rate fell to 1.6 percent in September, while the unemployment rate stood at 6.5 percent.

The summary said some members of the board of governors were concerned that a half-percentage-point cut could be interpreted as a sign of economic difficulties and thus raise expectations of even deeper interest rate cuts.

“Members of the Governing Council wanted to make it clear that a larger measure was appropriate given the economic data observed since July. At the same time, they continue to expect economic growth and an inflation rate close to the target,” the summary says.

He also recalls that the Bank of Canada plans to make its interest rate decisions one by one based on developments in the economy and inflation.

The next central bank announcement on interest rates is scheduled for December 11.

This report by The Canadian Press was first published November 5, 2024.

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