In a significant move last month, the Bank of Canada (BoC) reduced its key interest rate from 3.75% to 3.25%. This marked the fifth and final major rate announcement of the year, exceeding experts’ predictions of a 0.25% cut. The decision comes amidst rising economic concerns, particularly an increase in Canada’s unemployment rate, which now stands at 6.8% — its highest level in nearly eight years, excluding the peak pandemic years of 2020 and 2021.
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Why the Interest Rate Was Lowered
Economic indicators played a crucial role in the BoC’s decision. The rise in unemployment, coupled with signs of increased consumer spending and housing activity, signaled the need for action. According to the Bank of Canada, “Consumer spending and housing activity both picked up, suggesting lower interest rates are beginning to boost household spending.”
Additionally, the Bank emphasized its focus on maintaining inflation within the 1-3% target range. “With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range,” the BoC explained.
A Year of Substantial Rate Cuts
This recent rate cut is not the only major move by the Bank of Canada in 2024. In October, the BoC made another substantial cut, reducing its key rate by 0.5% to 3.75%. The trend began in June, when the policy rate was dropped from a longstanding 5% to 4.75% — the first reduction in over four years following six consecutive rate holds.
These measures reflect the Bank’s commitment to bolstering economic growth while keeping inflation under control.
Upcoming Policy Rate Announcements in 2025
The next interest rate update is scheduled for January 29, 2025. This update will include both a monetary policy report and commentary. The BoC’s announcements typically alternate between pure rate updates and combined updates with detailed economic commentary.
Here are the key dates for 2025:
- Wednesday, January 29, 2025 – Rate update, monetary policy report, and commentary
- Wednesday, March 12, 2025 – Rate update only
- Wednesday, April 16, 2025 – Rate update, monetary policy report, and commentary
- Wednesday, June 4, 2025 – Rate update only
- Wednesday, July 30, 2025 – Rate update, monetary policy report, and commentary
- Wednesday, September 17, 2025 – Rate update only
- Wednesday, October 29, 2025 – Rate update, monetary policy report, and commentary
- Wednesday, December 10, 2025 – Rate update only
All announcements are released at 9:45 am ET (6:45 am PT).
What Economists Predict for the Bank of Canada in 2025
2025 Rate Cuts: What’s Next for the Bank of Canada and the Economy
Bank of Canada Announces Another Rate Cut and Updates Mortgage Rules
Bank of Canada Reduces Key Interest Rate to 3.25%: Signals a Shift to Gradual Policy Adjustments
How to Stay Updated
To keep track of the Bank of Canada’s rate changes and economic outlook, consider following their official X account for live updates. You can also subscribe to their email notifications for timely alerts on policy announcements and reports.
For market observers and those impacted by interest rate changes, staying informed on these updates is crucial for planning financial strategies in 2025 and beyond.
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