The Bank of Canada cut its key interest rate for the first time in more than four years today, marking a major turning point in its fight against inflation.

Governor Tiff Macklem says the Bank of Canada has more confidence inflation is moving closer to its two per cent target, citing various indicators that suggest price pressures have retreated.

“If inflation continues to ease, and our confidence that inflation is headed sustainably to the two per cent target continues to increase, it is reasonable to expect further cuts to our policy interest rate,” Macklem said in remarks prepared for a morning press conference.

“But we are taking our interest rate decisions one meeting at a time.”

With the quarter-percentage-point cut, the central bank’s key interest rate now stands at 4.75 per cent.

Wednesday’s rate cut opens a new chapter for the Bank of Canada, which has been preoccupied with wrestling inflation down over the last two years.

With inflation down significantly and the economy stalling, most forecasters believed it was the right time for the central bank to begin lowering borrowing rates.

Canada’s annual inflation rate has steadily declined in recent months, reaching 2.7 per cent in April. Measures of underlying price pressures have also eased, giving the central bank more confidence that inflation will continue to trend lower.

The Canadian economy has also weakened under the weight of high interest rates. Economic growth in the first quarter came in lower than forecasters expected, and the unemployment rate has steadily risen, reaching 6.1 per cent in April.

Wednesday’s announcement puts the Bank of Canada ahead of other central banks in the Western world in cutting interest rates, including the U.S. Federal Reserve.

Macklem is scheduled to hold a news conference to discuss the central bank’s latest interest rate decision.