Canada Interest Rate

The Bank of Canada cut its key interest rate by 25bps to 2.75% in its March decision, as expected and previously signaled, to mark 225bps in rate cuts since the start of its loosening cycle in June 2024. The Governing Council noted that the Canadian economy grew more than expected in the fourth quarter with support from the past cuts in the policy rate, but growth is expected to slow at the turn of the year due to increasing trade conflict with the United States. The bank also noted that the continuously changing tariff threats from the US hurt gauges of consumer confidence and investment expectations, which are expected to erase the strong economic activity triggered by firms attempting to undercut trade barriers. In the meantime, the end of tax credits are expected to drive incoming inflation gauges to accelerate toward 2.5% after headline inflation remained below the 2% target for multiple months, but core gauges are set to gradually slow amid an expected ease in shelter inflation.