The Bank of Canada (BoC) has lowered its policy rate five times in 2024, bringing it to 3.25% as of the start of 2025. While further cuts are anticipated, inflation remaining around 2% suggests a more cautious approach. BoC Governor Tiff Macklem indicated a 'more gradual' approach to rate reductions in 2025, implying smaller cuts compared to the recent 50 basis point decreases.
. Across eight announcements, the Bank of Canada (BoC) lowered the policy rate five times in 2024, including by 50 basis points in both. We will ring in 2025 with a policy rate of 3.25%, which is the lowest it’s been in over two years. While forecasting across the board says there will be more interest rate cuts in 2025, CPI inflation has stayed around 2% since the summer and it seems like it would take extenuating circumstances to warrant another half-point cut any time soon.
BoC Governor Tiff Macklem all but said so himself at a “If you go back to June, we have now cut our policy rate by a total of 175 basis points, bringing it from 5% down to three-and-a-quarter percent. That's a lot, that's substantial. And those cuts will be working their way through the economy,” Macklem told reporters on December 11. “Going forward, I expect that Governing Council will be considering further reductions in the policy rate,” he added. “But as I said, with the policy rate now a lot lower, if the economy evolves broadly as we're expecting, I anticipate we'll be taking a more gradual approach. So what does a more gradual approach mean? Well, we've just cut by 50 basis points at the last two meetings, so ‘more gradual’ is more gradual than that.” Macklem says Governing Council will take a “more gradual” approach to rate cuts in 2025/Bank of Canada on X The next interest rate announcement — and first of 2025 — is scheduled for Wednesday, January 29, and while Macklem is erring vague when it comes to what the BoC’s next move will be exactly, there’s already plenty of speculation amongst economists with Canada’s ‘Big Five’ banks based on the last few data releases of the year.cooled to 1.9% (year over year) in November, TD Economist Admir Kolaj pointed to November’s “sticky” core inflation — that came in at 2.7% in November, matching October’s print — as reason enough for the central bank to take a more conservative approach to rate cuts in
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