The Bank of Canada announced a 25-basis point cut to its overnight rate to 3% while bringing an end to its quantitative tightening policy as the national economy grows stronger.
The Canadian central bank also brought down its Bank Rate to 3.25% and the deposit rate at 2.95%, adding that it will gradually restart asset purchases in early March. Today’s actions mark the sixth rate cut by the Bank of Canada after five consecutive cuts during 2024.
“In Canada, past cuts to interest rates have started to boost the economy,” said the central bank in a statement. “The recent strengthening in both consumption and housing activity is expected to continue. However, business investment remains weak. The outlook for exports is being supported by new export capacity for oil and gas.”
The Bank of Canada noted that job growth was strengthening after a year of lethargy and predicted the nation’s GDP growth will improve, albeit at a more moderate pace than previously predicted. Despite the threat of US tariffs, the central bank forecast a vibrant economy for 2025.
“The cumulative reduction in the policy rate since last June is substantial,” the central bank added. “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.”
