The Bank of Canada has announced a 50 basis point reduction in its policy interest rate, bringing it to 3.25%. This marks the fifth consecutive rate cut since June, reflecting the Bank’s efforts to support economic growth while keeping inflation near its 2% target.
Recent economic data influenced the decision, with Canada’s economy growing by only 1% in the third quarter and further slowdown expected in the final quarter of the year. However, lower interest rates have spurred a rebound in consumer spending and housing activity, offsetting declines in business investment and exports.
While inflation has stabilized at around 2%, temporary factors like a GST holiday are expected to cause short-term fluctuations. The Bank is closely monitoring risks, including elevated wage pressures and potential U.S. trade tariffs, while maintaining a cautious approach to future rate cuts.
This rate reduction is already supporting household spending and could further enhance economic recovery as the Bank evaluates its monetary policy step by step.