Bank of Canada reduces interest rate, shifts monetary policy
Date
1/30/2025 7:02:19 AM
(MENAFN) On Wednesday, the bank of Canada announced a 25 basis point reduction in its overnight policy interest rate, bringing it to 3 percent during the first monetary policy meeting of 2025. This move aligns with market expectations, marking a shift in the bank's approach to managing the economy. Alongside the rate cut, the bank revealed plans to complete the normalization of its balance sheet, effectively ending its policy of quantitative tightening.
As part of its new approach, the Bank of Canada will restart asset purchases in early March. These purchases will begin gradually, with the goal of stabilizing its balance sheet before allowing it to grow modestly in line with economic growth. This strategy indicates a more accommodative stance in response to current economic conditions.
Looking ahead, the Bank of Canada projected global economic growth to continue at around 3 percent over the next two years. While growth in the US is expected to be stronger, driven by increased consumption, the euro area is likely to face subdued growth due to competitiveness pressures. The bank revised its expectations for Canada's GDP growth, forecasting a stronger 1.8 percent growth in both 2025 and 2026, up from the 1.3 percent growth projected for 2024.
The bank noted that its previous interest rate cuts have started to support economic activity, contributing to the positive outlook for the upcoming years. However, it also acknowledged that slower population growth due to reduced immigration targets could moderate overall growth.
MENAFN30012025000045015839ID1109148377
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.