The Bank of Canada lowers key interest rate to 3.25%

(December 11, 2024 )

The Bank of Canada lowers key interest to 3.25%


The Bank of Canada lowered the interest rate again by 50 basis points to 3.25%, its fifth consecutive rate cut this year, but signaled future cuts will ease at a slower pace.

"We anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected," Bank of Canada governor Tiff Mackem told reporters Wednesday, confirming the Bank of Canada is considering further reductions in the policy rate." But added that economic outlook is "clouded" due to the looming threat of tariffs by the US, and the effect of the Government's 2-month GST holiday on certain items.

RBC and CIBC economists are predicting the Bank of Canada will continue to lower the policy rate gradually in 2025, with CIBC coming in at a low of 2.25%, and RBC at 2%.

The Bank of Canada's interest rate cut in October, which reduced borrowing costs, had a noticeable effect on the housing market, particularly in terms of increased sales activity. In November 2024, there was a rise in home sales, notably in regions such as Langley and major cities like Calgary and Vancouver. However, despite this uptick in transactions, home prices did not experience a significant surge. While lower rates helped reduce mortgage costs and sparked more buyer interest, it did not immediately drive up property values, suggesting a more cautious market recovery.

Senior deputy governor Carolyn Rogers told reporters that the central banks expects "some more pickup" in 2025 amid the sharp drops in the policy rate and mortgage changes coming from the federal government aimed at making it easier for some buyers to break into the housing market.

The Bank of Canada's first interest rate decision of the new year comes on January 29, 2025

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