Bank of Canada Reduces Interest Rates to Boost Economy

In a move to address economic challenges, the Bank of Canada has cut its key interest rate by 0.5%, bringing it down to 3.25%. This marks the fifth rate reduction this year, with policymakers aiming to encourage growth as inflation reaches more stable levels. Bank Governor Tiff Macklem stated that easing monetary policy is crucial to supporting an economy that’s showing signs of slowing momentum.

Recent data points to a cooling economy, with weaker-than-expected growth and unemployment rising to 6.8%. Other factors, like reduced immigration targets and a temporary sales tax holiday, are expected to influence growth and inflation in early 2025. Meanwhile, businesses face uncertainty over potential tariffs on Canadian exports proposed by incoming U.S. President Donald Trump, which could disrupt trade relations.

Looking ahead, the central bank plans to adjust its approach to rate changes based on how the economy evolves. While the recent cuts aim to create room for recovery, officials remain cautious about the challenges posed by shifting policies and external risks.