Bank of Canada Rate Decrease January 2025
Bank of Canada Rate Decrease January 2025
Date Posted: January 29, 2025
The Rate Announcement
The Bank of Canada has announced a reduction in its target for the overnight rate by 25 basis points, bringing it to 3.0%. This decision marks the sixth consecutive rate cut, though the pace has slowed compared to previous 50 basis point reductions.
The Bank's Governing Council also revealed plans to conclude the normalization of its balance sheet, signaling an end to quantitative tightening. Starting in early March, the Bank will gradually resume asset purchases to stabilize and modestly grow its balance sheet in line with economic growth.
This policy adjustment comes amid heightened uncertainty due to potential U.S. trade tariffs on Canadian goods. The Bank cautioned that such tariffs could significantly impact Canada's economic outlook, which is already facing challenges like subdued business investment, elevated unemployment, and fluctuating consumer spending.
What Does This Impact?
The Bank of Canada’s target overnight policy rate affects the interest you pay from lenders like banks. The higher the overnight rate, the more interest you will pay. The December 2024 drop from the Bank of Canada means that variable and adjustable mortgage holders will see a decrease in their interest costs and possibly a decrease in their mortgage payments. Fixed rate mortgages are not as directly impacted by the BOC rate announcement, however the bond markets which influence fixed rates have largely already built in the expected 0.50% rate drop.
Getting Back on Track
Despite these challenges, inflation remains close to the Bank's 2% target. The Bank projects that inflation will stay around this level over the next two years, supported by recent policy actions and stable global economic growth.
The next rate announcement is scheduled for March 12, 2025.
If you have questions about your own mortgage, and the best strategy for you, please contact your broker today.
Read The Full Article Here: