Bank of Canada Lowers Rate to 2.5 Percent
(MENAFN) The Bank of Canada lowered its benchmark overnight interest rate by 25 basis points on Wednesday, citing mounting global economic uncertainty and the dampening effects of U.S. tariffs. The cut brings the rate to 2.5%, marking its lowest level since June 2022.
The central bank's accompanying bank rate and deposit rate now stand at 2.75% and 2.45%, respectively.
“After remaining resilient to sharply higher US tariffs and ongoing uncertainty, global economic growth is showing signs of slowing. In the United States, business investment has been strong but consumers are cautious and employment gains have slowed,” the bank said in a statement.
The bank also noted that some U.S. companies appear to be passing tariff-related costs to consumers, contributing to a recent uptick in inflation. Meanwhile, the eurozone has experienced decelerating growth under similar trade pressures.
Canada’s economy hasn’t been immune. The country’s GDP contracted by roughly 1.5% in the second quarter, largely due to fallout from trade tensions. Job figures have also weakened, with the bank pointing to back-to-back months of employment decline.
“Job losses have largely been concentrated in trade-sensitive sectors, while employment growth in the rest of the economy has slowed, reflecting weak hiring intentions. The unemployment rate has moved up since March, hitting 7.1% in August, and wage growth has continued to ease,” the statement read.
Inflation in August was recorded at 1.9%, with core inflation indicators hovering near 3% and headline inflation settling around 2.5%.
“With a weaker economy and less upside risk to inflation, Governing Council judged that a reduction in the policy rate was appropriate to balance the risks better,” the bank said.
First Rate Cut Since March
This marks the first rate cut since March and the eighth reduction in seven consecutive meetings, totaling a 225 basis point decline. The central bank had paused its easing cycle in April and held rates steady through June and July.
The move also cements Canada’s position as the first G7 central bank to pivot to rate cuts following a wave of aggressive monetary tightening aimed at reining in inflation.
Legal Disclaimer:
EIN Presswire provides this news content "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 author above.
