Calgary 
The Bank of Canada has lowered its target for the overnight rate to 2.75%, with the Bank Rate set at 3% and the deposit rate at 2.70%, citing economic uncertainty due to heightened trade tensions with the United States.
Credit: Bank of Canada Museum
Highlights from the announcement:
- Canada’s economy grew by 2.6% in Q4 2024, following a 2.2% increase in Q3, exceeding prior expectations.
- The first quarter of 2025 is expected to see slower growth due to escalating U.S. trade tariffs.
- Business investment is declining, and consumer confidence has dropped significantly.
- A surge in exports ahead of new tariffs has offset some negative effects on domestic demand.
- The U.S. economy has slowed, with inflation slightly above target.
- The Eurozone saw modest economic expansion at the end of 2024.
- China’s economy grew strongly, supported by government policies.
- Global equity prices have fallen, and bond yields have eased amid lower North American growth expectations.
- Oil prices have remained volatile and below the Bank’s January assumptions.
- The unemployment rate fell to 6.6% between November and January, but job growth stalled in February.
- Wage growth has moderated, and trade uncertainty is raising concerns about future employment.
- Inflation remained near the 2% target, but is projected to rise to 2.5% in March as a temporary GST/HST suspension ends.
- Shelter price inflation continues to push core inflation above 2%.
The Bank of Canada emphasized that monetary policy cannot counteract the effects of a trade war but aims to prevent inflation from becoming entrenched. Future decisions will depend on inflation expectations and economic developments.
