Bank of Canada lowers key interest rate to 3%

(January 29, 2025 )


The Bank of Canada reduced its key interest rate to 3%, citing concerns over ongoing trade uncertainties, particularly regarding a potential threat from the United States to impose blanket tariffs of Canadian goods. The central bank emphasized that such tariffs would "test" Canada's economic resilience, and the outlook for the economy has become more uncertain due to the looming trade dispute.

“The potential for a trade conflict triggered by new U.S. tariffs on Canadian exports is a major uncertainty. This could be very disruptive to the Canadian economy and is clouding the economic outlook,” said Bank of Canada governor Tiff Macklem, “A long-lasting and broad-based trade conflict would badly hurt economic activity in Canada. At the same time, the higher cost of imported goods will put direct upward pressure on inflation.”

The Bank of Canada noting that inflation has been close to the 2% target since last summer showing monetary policy has worked to restore price stability. The lower interest rates are also boosting household spending and economic activity is picking up.

Further from Macklem, "As we consider our monetary policy response, we will need to carefully assess the downward pressure on inflation from weakness in the economy, and weigh that against the upward pressure on inflation from higher input prices and supply chain disruption.... as always, the bank will be guided by our monetary policy framework and our commitment to maintain price stability over time".


The Bank of Canada's next interest rate decision of the year comes on
March 12, 2025


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