Statistics Canada monthly labor force survey

Bank of Canada Slashes Rates to 3.25% Amid High Unemployment, Signals Cautious Approach

Dec 11, 2024, 02:46 PM

The Bank of Canada (BoC) has cut its key interest rate by 50 basis points to 3.25%, marking the second consecutive half-point reduction. This move was widely anticipated by financial markets, with expectations leaning towards a significant cut to bolster economic growth amid weak consumer spending and an unemployment rate of 6.8%, the highest in eight years. The decision reflects the BoC's response to stable inflation and a sluggish economic outlook, with GDP per capita having declined for six straight quarters. The central bank has dropped its promise of further rate cuts if economic forecasts materialize, instead signaling a more gradual approach to monetary policy adjustments, hinting at smaller increments in future rate changes. Governor Macklem indicated that the rate cut aims to support growth, although the BoC acknowledges increased uncertainty due to potential U.S. tariffs and the muted impact of lower immigration on inflation, which is expected to remain near 2%.