Bank of Canada watching economy closely after half-point rate cut
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OTTAWA — The Bank of Canada’s governing council expects its second straight outsized interest rate cut helped it turn a corner in its fight to tame inflation, but it is watching the economy closely amid weaker than expected growth.
The central bank’s summary of deliberations released Monday offers a glimpse into the council’s discussions in the lead up to the Dec. 11 rate cut, which lowered its key interest rate by half a percentage point.
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Members considered only cutting by a quarter-point, but ultimately brought the rate down to 3.25 per cent in a bid to bring it closer to its so called neutral rate, where it is neither slowing nor speeding up economic growth.
They noted that lower immigration targets are likely to weigh on economic growth next year and that tariff threats from incoming U.S. president Donald Trump are a “major new source of uncertainty.”
Council members also said they’d be considering further rate cuts, but would be taking a more gradual approach given the five consecutive cuts since June, and giving the economy time to respond to them.
The next rate decision and quarterly economic forecast are scheduled for Jan. 29.
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