Bank of Canada Cuts Rate to 3.25% in Fifth Consecutive Cut, Signals Slower Reductions

Dec 11, 2024, 02:49 PM

The Bank of Canada has cut its key interest rate by 50 basis points to 3.25%, reducing it from the previous 3.75%. This marks the second consecutive rate cut of this magnitude and the fifth cut in a row, totaling a 150 basis point reduction in 2024. The decision, in line with market expectations, aims to support the economy amid weak growth and rising unemployment, which has reached 6.8%, the highest in eight years. GDP per capita has declined for six straight quarters, and the Canadian dollar is at a 4.5-year low. Policymakers signaled a more gradual approach to future rate cuts, with Governor Macklem stating, "We anticipate a more gradual approach to policy." They also dropped the commitment to further cuts if projections materialize. The central bank cited concerns over stable inflation, increased U.S. tariff risks, and reduced immigration levels impacting GDP growth. Prime Minister Justin Trudeau commented that the rate cut is "a step in the right direction to bring down costs for Canadians."