Bank of Canada cuts key interest rate in 5th consecutive reduction

The Bank of Canada has cut its benchmark interest rate to 3.25 per cent Wednesday morning making it the rate’s fifth consecutive reduction.

The Bank has reduced the interest rate by 50 basis points, the bank rate to 3.75 per cent and deposit rate at 3.25 per cent.

The bank made the announcement Wednesday morning, making it the fifth straight reduction in the central bank’s easing cycle since the October announcement to reduce the interest rate.

The Governing Council says it decided to reduce the policy rate by 50 basis points to support growth and keep inflation close to the middle of the target 1-3 per cent range.

The announcement also reads, “the Bank is committed to maintaining price stability for Canadians by keeping inflation close to the two per cent target.”

According to the bank, the country saw its economy grow by one per cent in the third quarter and a weaker fourth quarter than they projected.

This follows as the Canadian dollar depreciated in the face of the strength in the U.S. dollar.

The bank notes the Consumer Price Index inflation has been about two per cent since the summer months, with an expectation to average close to two per cent over the next couple of years.

It says the GST holiday break will temporarily lower inflation but will bounce back one the break ends.

The bank also said the possibility of the incoming U.S. administration imposing new tariffs on Canadian exports to the U.S. has increased uncertainty and clouded the economic outlook.

The next scheduled date for announcing the overnight rate target is Jan. 29, 2025. The bank will publish its next full outlook for the economy and inflation, including risks to the projection.

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