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Bank of Canada expected to cut interest rates again: here’s why

by admin January 30, 2025
January 30, 2025
Bank of Canada expected to cut interest rates again: here’s why

The Bank of Canada is expected to lower its key interest rate by 25 basis points on Wednesday, as mounting trade tensions and political uncertainty weigh on the country’s economic outlook.

With potential US tariffs on Canadian goods looming and both federal and provincial elections on the horizon, policymakers are likely to take a cautious approach to monetary policy.

According to a Bloomberg survey of 22 economists, most experts anticipate the central bank will reduce its overnight rate to 3%, marking its first rate adjustment of 2025.

Bank Governor Tiff Macklem is expected to justify the move by pointing to slowing economic growth, rising unemployment, and external risks, particularly from the United States.

“There are enough reasons to cut interest rates even without the threat of tariffs,” Royce Mendes, an economist at Desjardins was quoted as saying by the TorontoStar.

“Given the signs of economic weakness, a 25-basis-point cut is not only expected but justified.”

However, the potential imposition of tariffs by former U.S. President Donald Trump—expected as early as February 1—could further complicate Canada’s economic trajectory.

If widespread tariffs take effect, experts warn that Canada’s economy could be pushed into a recession, necessitating additional rate cuts to stimulate growth.

At the same time, if Canada retaliates with countermeasures, it could drive up consumer prices, forcing the Bank of Canada to reconsider its policy direction, possibly pausing or even reversing rate cuts.

Beyond the rate decision, the Bank of Canada will also release its quarterly monetary policy report, providing updated forecasts on inflation and economic growth.

These projections will offer insights into whether further rate cuts are likely in the coming months.

The official rate announcement is scheduled for 9:45 a.m. ET, followed by a live press conference at 10:30 a.m. with Governor Macklem and Senior Deputy Governor Carolyn Rogers.

Markets will closely watch their commentary for clues on the bank’s outlook and response strategy in the face of global uncertainties.

With trade tensions escalating and economic pressures mounting, the Bank of Canada’s decision will have significant implications for businesses, consumers, and financial markets in the months ahead.

The post Bank of Canada expected to cut interest rates again: here’s why appeared first on Invezz

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