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Canada: 25bp Rate Cut To 3.0% (Consensus 3.0%) in Jan-25

• The Bank of Canada reduced its policy rate by 25 basis points to 3% and announced the end of quantitative tightening, aligning with expectations, as inflation remains stable around 2%.
• The economic outlook is clouded by external risks, particularly the threat of new US tariffs. Meanwhile, domestic conditions show a soft labour market, weak business investment, and moderate GDP growth projections of 1.8% in 2025 and 2026.
• The Bank has signalled a cautious, data-dependent approach to future rate adjustments, monitoring inflation risks, trade policy developments, and the effectiveness of past monetary easing.

Oil in 2025

• The threat of trade wars makes forecasting the oil price this year unusually hazardous. However, based on the ‘known knowns’, one can safely assume that the downward pressure we saw through 2024 will persist. My forecast for Brent crude on 31 December is, therefore, USD65 per barrel.

By Alastair Newton

Canada: 50bp Rate Cut To 3.25% (Consensus 3.25%) in Dec-24

• The Bank of Canada reduced its policy rate by 50 basis points to 3.25%, continuing its easing cycle to support growth as inflation stabilises near the 2% target, broadly in line with expectations.
• Future rate decisions will hinge on trends in inflation, labour market conditions, and global risks, including reduced immigration targets and potential US tariffs, which introduce structural and external uncertainties.
• The Bank has adopted a cautious, data-dependent approach to further rate cuts. It aims to balance economic stimulus with inflation control while monitoring the effects of monetary easing on household demand and economic slack.

Canada: 50bp Rate Cut To 3.75% (Consensus 3.75%) in Oct-24

• The Bank of Canada reduced the policy rate by 50 basis points to 3.75%, consistent with the consensus forecast, as inflation stabilised near the 2% target, allowing for further easing to support demand.
• Future policy decisions will be heavily influenced by the pace at which excess supply in the economy is absorbed, particularly in the labour market, where unemployment remains elevated at 6.5%.
• While further rate cuts are expected, the Bank has emphasised a cautious, data-dependent approach, with the timing and extent of cuts contingent on inflation and domestic demand developments.