Friday, May 30, 2025

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Bank of Canada Cuts Interest Rate By 50 Basis Points Again To 3.25%

The Bank of Canada delivered another significant rate cut on Wednesday, lowering its benchmark interest rate by 50 basis points to 3.25%. This marks the fifth consecutive rate reduction and matches the magnitude of October’s cut, signaling the central bank’s continued efforts to stimulate economic growth amid persistent economic headwinds.

The decision comes as Canada’s economy shows signs of weakness, with third-quarter GDP growth falling short of the BoC’s October projections and fourth-quarter indicators suggesting further softening. While consumer spending and housing activity have shown some improvement, business investment, inventories, and exports dragged down overall growth.

Labor market conditions remain challenging, with the unemployment rate rising to 6.8% in November. Although wage growth has eased slightly, it continues to outpace productivity gains, presenting ongoing inflationary concerns for policymakers.

The BoC noted that recent policy announcements, including reductions in targeted immigration levels and various federal and provincial measures, will impact near-term growth and inflation dynamics. The central bank emphasized its focus on underlying inflation trends, looking past temporary effects of measures such as the GST holiday on certain consumer products.

Inflation has hovered around the 2% target since summer, with the BoC projecting it to remain close to this level over the next two years. However, increased uncertainty surrounds the economic outlook, partly due to the possibility of new tariffs on Canadian exports to the United States under the incoming administration.

Looking ahead, the BoC stated it will evaluate the need for further rate reductions on a meeting-by-meeting basis, guided by incoming data and its assessment of the inflation outlook.

The next rate decision is scheduled for January 29, 2025.


Information for this briefing was found via the Bank of Canada and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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