The Bank of Canada wants inflation to keep dropping… but not by too much. High interest rates have helped tame inflation from 8.1% in June 2022 to 2.5% this past July. While that’s getting close to the bank’s 2% target, higher borrowing costs have done a number on the economy, such as pushing Canada’s unemployment rate to its highest level in two years. Now, the central bank needs to balance things carefully. If inflation dips below the target, that’s a sign that the economy is hurting. “We want to see economic growth pick up to absorb the slack in the economy so inflation returns sustainably to the 2% target,” Governor Tiff Macklem said in a statement. In an effort to give the economy a little boost, yesterday the bank made its third interest rate cut this year, landing Canada’s overnight rate at 4.25%.