- The Bank of Canada has cut its key interest rate by 50 basis points
- This decision comes as investors had increasingly bet on a significant rate reduction following a sharp rise in the unemployment rate
- Since June, the Bank of Canada has reduced its key policy rate by a total of 175 basis points
- The next scheduled announcement for the overnight rate target is set for January 29, 2025
In a move to address economic concerns, the Bank of Canada has cut its key interest rate by 50 basis points.
The bank reduced its target for the overnight rate to 3¼ per cent, with the bank rate at 3¾ per cent and the deposit rate at 3¼ per cent.
This comes as investors had increasingly bet on a significant rate reduction following a sharp rise in the unemployment rate.
In a media release, the bank stated that the Canadian economy grew by 1 per cent in Q3, somewhat below its October projection, and Q4 looks weaker than projected.
“Reductions in targeted immigration levels suggest GDP growth next year will be below the bank’s October forecast,” the release said. “The effects on inflation will likely be more muted, given that lower immigration dampens both demand and supply.”
The unemployment rate rose to 6.8 per cent last month as employment continued to grow more slowly than the labour force.
The central bank’s latest policy adjustment aims to lower credit conditions, making borrowing cheaper. This is expected to boost consumer spending and business investments, while also enhancing the appeal of equities.
Since June, the Bank of Canada has reduced its key policy rate by a total of 175 basis points. This series of cuts reflects ongoing worries about the country’s tepid economic growth, despite annual inflation remaining within the target range of 2 per cent.
The next scheduled announcement for the overnight rate target is set for January 29, 2025.
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(Top image via the Bank of Canada.)