Bank of Canada closely monitoring economy following half-point rate cut

The Bank of Canada’s governing council anticipates that its recent significant interest rate cut, the second in a row, has helped in their efforts to control inflation. However, they remain vigilant about the economy due to lower-than-expected growth prospects.

The council’s summary of discussions leading up to the December 11 rate cut, which reduced the key interest rate by 0.5%, provides insights into their deliberations. Initially considering a quarter-point cut, they eventually opted for a larger reduction to 3.25% to approach the neutral rate, aiming to neither slow down nor accelerate economic growth.

The council acknowledged the potential impact of reduced immigration targets on next year’s economic growth, as well as the uncertainty posed by tariff threats from the incoming U.S. president, Donald Trump.

In addition, council members mentioned the possibility of further rate cuts, albeit with a more gradual approach given the consecutive cuts since June, allowing the economy time to react to these changes.

The next rate decision and quarterly economic forecast are scheduled for January 29.

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