Bank Of Canada Cuts Interest Rates
2025-01-26
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(fxcue news) - The Bank of Canada on Wednesday announced its widely expected decision to lower interest rates by a quarter point, noting consumer price inflation remains close to 2 percent and the economy is in excess supply.
After cutting rates by 50 basis points at each of its two previous meetings, the Bank of Canada decided to lower the overnight rate by 25 basis points to 3 percent, with the Bank Rate at 3.25 percent and the deposit rate at 2.95 percent.
"Lower interest rates are boosting household spending and, in the outlook published today, the economy is expected to strengthen gradually and inflation to stay close to target," the Bank of Canada said. "However, if broad-based and significant tariffs were imposed, the resilience of Canada's economy would be tested."
The bank added, "We will be following developments closely and assessing the implications for economic activity, inflation and monetary policy in Canada."
The Bank of Canada forecast Canadian GDP growth of 1.8 percent in both 2025 and 2026 following a 1.3 percent increase in 2024.
The Canadian central bank also said it expects consumer price inflation will be around the 2 percent target over the next two years.
However, the Bank of Canada noted a protracted trade conflict with the U.S. would most likely lead to weaker GDP and higher prices in Canada.
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