Mortgage Blog
Bank of Canada Rate Announcement - March 12, 2025
March 12, 2025 | Posted by: Crescent Mortgage Corp.
This morning the BoC reduced its target for the overnight rate by 25 bps to 2.75%.
Our economy entered the new year in a solid position, with inflation near its 2% target and healthy GDP growth. However, heightened trade tensions and US imposed tariffs are expected to slow the pace of economic activity and place upward pressure on inflation in Canada. The economic outlook is much more difficult to discern given the current level of uncertainty and the pace at which the landscape is changing.
Canada’s economy grew by a stronger than expected 2.6% in the last quarter of 2024. Past rate cuts have boosted economic activity and in particular consumption and housing. Having said that, GDP growth in the first quarter of 2025 will likely slow as the trade war weighs on consumers and businesses alike. Recent surveys indicate there has been a sharp drop in consumer confidence and a slowdown in business spending as companies postpone or cancel investments.
Inflation remains close to the 2% target as January’s CPI came in at 1.9%. Inflation is expected to increase to about 2.5% in March. The Bank’s preferred measures of core inflation remain above 2% driven by increases in shelter prices (rent and mortgage). Short-term inflationary expectations have increased in light of the expected impact of tariffs on prices.
The BoC stated “While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing US tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest. Against this background, and with inflation close to the 2% target, Governing Council decided to reduce the policy rate by a further 25 basis points.”
The next policy interest rate announcement is scheduled for April 16, 2025.