The Bank of Canada made another important move on Wednesday by announcing a 0.5% reduction in its key rate, dropping it from 3.75% to 3.25%.
This decision comes after a previous reduction of 0.5% on October 23, marking the largest reduction since December 2022. This is now the fifth consecutive reduction in the key rate.
“In Canada, economic growth came in at 1% in the third quarter, slightly below the Bank’s October projection, and is also expected to be more modest than expected in the fourth quarter. On the other hand, consumer spending and housing market activity have picked up, suggesting that lower interest rates are starting to stimulate household spending,” the Bank of Canada (BoC) said in a statement. press release.
She also believes that a certain number of recently announced public policy measures “will have an effect on the outlook for inflation and short-term growth” in the country.
The BoC expects other federal and provincial policies – including the temporary suspension of the GST on certain consumer products, one-time payments to individuals and changes to mortgage financing rules – to impact the inflation.
The Trump administration has “blurred the outlook”
Additionally, the possibility that the next U.S. administration, under Donald Trump, would impose new tariffs on Canadian exports to the United States “has increased uncertainty and clouded the economic outlook.”
“We will evaluate the need for further reductions one decision at a time,” we can also read.
The next update of the key rate will take place on January 29, 2025.
Remember that the Bank of Canada had maintained its rate at 5% since July 12, 2023. On June 5, it had already decided to reduce this rate for the first time since March 2020.
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