The BoC (Central Bank of Canada) cut its main interest rate by 25 basis points this Wednesday (29), the 2,25%, stating that the weakness of the economy and inflation close to the 2% target justify a more accommodative monetary policy. The deposit rate was reduced to 2.20% and the bank rate to 2.5%.
The bank signaled that this cut could mark a break in the loosening cycle. According to the statement, the current interest level is “appropriate to maintain inflation close to 2% while supporting the economy in this period of structural adjustment.”
The BoC stated, however, that it is “prepared to respond” if the inflation or activity scenario deviates from current projections.
In a statement, the monetary authority highlighted that “they are now clearer”, allowing the bank to resume full projections for the global and Canadian economies.
The BoC warned, however, that North American trade policy “remains unpredictable”, which increases the margin of uncertainty in their estimates.
Canada’s economy shrank 1.6% in the second quarter, pressured by falling exports and a decline in business investment, while household consumption maintained a solid pace.
The bank cited that sectors such as automotive, steel, aluminum and wood and that GDP growth should remain weak for the remainder of the year, before a gradual recovery from 2026.
The job market remains “fragile”, according to the BoC, with an unemployment rate of 7.1% and slowing wage growth.
