Bank of Canada cuts rates for first time in four years

TORONTO (Reuters) - The Bank of Canada on Wednesday trimmed its key policy rate by 25 basis points to 4.75%, in a widely expected move that marked its first cut in four years, and said more easing was likely if inflation continued to ease.

MARKET REACTION: CAD/

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COMMENTS

ANDREW GRANTHAM, SENIOR ECONOMIST, CIBC CAPITAL MARKETS

"Financial markets had mostly priced in today's cut to the overnight rate beforehand, but long rates and the Canadian dollar still moved lower on the news as a perceived dovish tone suggests the likelihood of a greater number of follow up moves. We continue to forecast a further 25 bp (basis point) reduction at the next meeting in July, and a total of 4 cuts - 3 more after today's - by the end of the year."

STEPHEN BROWN, DEPUTY CHIEF NORTH AMERICA ECONOMIST, CAPITAL ECONOMICS

"Today's interest rate cut from the Bank of Canada will be the first of many, and the dovish tone of the accompanying communications suggests that another rate cut in July is already nailed on. For now, our forecast is that there will be three more 25 bp (basis point) cuts this year, implying that the Bank will pause at one of its meetings, but, if anything, the odds seem to favour cuts at every meeting."

SIMON HARVEY, HEAD OF FX ANALYSIS FOR MONEX EUROPE AND MONEX CANADA

"Despite some uncertainty, policymakers followed the overwhelming evidence from the data and cut rates by 25 basis points as we expected, while keeping both options on the table for July. We suspect that Governor (Tiff) Macklem will do little to guide markets further in the press conference, instead stressing data dependence, leaving near-term expectations contingent on Friday's jobs report and whether it confirms or reverses the strength in employment seen in April."

DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS, SCOTIABANK

"I will never believe another word from Governor Macklem. One month ago he was saying he needed months of data and then he turns around and cuts rates few weeks later. I think the governor's credibility is in tatters. After letting inflation run (out of control) for four years, four months of data is not enough to cut rates."

ANDREW KELVIN, HEAD OF CANADIAN AND GLOBAL RATES STRATEGY AT TD SECURITIES

"The bank is signaling that they are going to be cautious in continuing to move rates lower ... which implies probably a fairly gradual easing process. We do expect they will cut rates again in July, but we think that they will take a pause after the July meeting to assess where the economy is going."

(This story has been corrected to fix Derek Holt's quote to say 'one month ago' from 'few months')

(Reporting by Fergal Smith, Nivedita Balu and Divya Rajagopal; Editing by Fergal Smith and Jonathan Oatis)