Last week, the Bank of Canada lowered its key interest rate by one quarter of one percent, bringing it down to 2.5 per cent.

That was the first rate cut we’ve seen since March, after three straight meetings where the Bank kept rates steady at 2.75 per cent.

If you read my column two days before the announcement, you’ll know I said the move was very likely and sure enough, it happened. But what does that mean and what did the bank signal to Canadians by making this rate cut now?

Let’s break it down in plain language:

Why did the BoC cut rates?

The big reason is the Canadian economy is slowing down. Over the past couple of months, we’ve lost more than 100,000 jobs and unemployment has climbed to the highest level in almost a decade (not counting the pandemic years). When people aren’t working, they’re spending less, which slows the whole economy.

On top of that, Canada’s overall economic growth (measured as GDP) shrank by about 1.6% in the spring and things aren’t looking much better for the........

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