Mortgage Blog
Bank of Canada Rate Announcement - January 29, 2025
January 29, 2025 | Posted by: Crescent Mortgage Corp.
The BoC reduced its target for the overnight rate 25 bps rate today to 3.00%. This is the Bank’s sixth consecutive rate cut.
Projections published today were subject to greater uncertainty due to the rapidly evolving policy landscape, particularly the threat of trade tariffs by the new administration in the United States. US growth has been revised up, mainly due to stronger consumption. US bond yields have risen, driven by strong growth and more persistent inflation. Conversely, yields in Canada have dropped slightly. The Canadian dollar has depreciated materially against the US dollar in the face of trade uncertainty and broader strength in the US currency.
Locally past cuts to interest rates have started to boost the economy. The recent strengthening in both consumption and housing activity is expected to continue. However, business investment remains weak. Canada’s labour market remains soft, with the unemployment rate coming in at 6.7% in December.
The BoC forecasts GDP growth will improve in 2025. However, reduced immigration targets will slow population growth and moderate GDP. 2024 saw 1.3% GDP growth, while the bank currently expects GDP to grow by 1.8% in both 2025 and 2026.
CPI inflation remains close to 2%, with some volatility as a result of the temporary HST holiday on some consumer products. The BoC projects CPI inflation will be around its 2% target the next two years.
Lower interest rates are boosting household spending, and the economy is expected to gradually strengthen with inflation remaining close to target. However, the potential introduction of significant tariffs would test the resilience of Canada’s economy. The Bank is resolved to closely monitoring and assessing the implications for economic activity, inflation and monetary policy in Canada.
The next interest rate announcement is scheduled for March 12, 2025.