Toronto financial district
The Bank of Canada has lowered its key policy rate by 25 basis points to 2.75 per cent as economic uncertainty continues to grow due to escalating U.S. trade tensions.
The Bank says while Canada’s economy ended 2024 stronger than expected — with GDP growth reaching 2.6 per cent in the fourth quarter — trade uncertainty is now limiting consumer spending and stalling business investment. Recent surveys show a sharp decline in consumer confidence, while some companies have postponed or cancelled investment plans.
Employment growth had strengthened in late 2024 but stalled in February. Although recent interest rate cuts helped boost consumer spending and housing activity, the Bank warns that slower growth is likely in early 2025.
Inflation has remained near the bank’s 2 per cent target, reaching 1.9 per cent in January. With the end of a temporary GST/HST suspension, inflation is expected to rise to about 2.5 per cent in March. The bank’s core inflation measures remain above 2 per cent, largely due to higher shelter costs.
The bank says that while monetary policy cannot offset the full impact of a trade war, the rate cut aims to stabilize consumer prices and support economic growth. The bank will continue to monitor inflation expectations and assess risks to the Canadian economy.
The next rate announcement is scheduled for April 16, 2025.
(Written by: Joseph Goden)
