OTTAWA, June 5 (Xinhua) -- The Bank of Canada on Wednesday reduced its benchmark interest rate by 25 basis points to 4.75 percent, marking a significant turning point in the central bank's efforts to tame inflation.

With continued evidence that underlying inflation is easing, monetary policy no longer needs to be as restrictive, the Bank said in a press release.

"If inflation continues to ease, and our confidence that inflation is headed sustainably to the 2 percent target continues to increase, it is reasonable to expect further cuts to our policy interest rate," said Governor Tiff Macklem.

"We don't want monetary policy to be more restrictive than it needs to be to get inflation back to target. But if we lower our policy interest rate too quickly, we could jeopardize the progress we've made," Macklem noted.

According to the release, CPI inflation eased further in April to 2.7 percent. The Bank's preferred measures of core inflation also slowed and three-month measures suggest continued downward momentum. Indicators of the breadth of price increases across components of the CPI have moved down further and are near their historical average.

However, shelter price inflation remains high and risks to the inflation outlook remain, the Bank added.

The economy is still operating in excess supply, the Bank said, and economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7 percent, first-quarter GDP growth was slower than expected.

Weaker inventory investment dampened activity. Consumption growth was solid at about 3 percent, and business investment and housing activity also increased. Labour market data show businesses continue to hire, the Bank said. Enditem

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