Canadian Central Bank Lowers Key Interest Rate Again: Reactions and Forecasts

The Bank of Canada has once again reduced its key interest rate by half a percentage point, bringing it to 3.25 percent. This measure aims to stimulate growth and address economic challenges. Decision-makers emphasized that future adjustments to the key interest rate would be based on new information and the impact on inflation forecasts. This year, the central bank has already implemented five rate cuts with the aim of combating rising unemployment and other economic weaknesses. Economists anticipate that borrowing costs could continue to decrease, particularly if the designated US President Donald Trump fulfills his threat to impose 25 percent tariffs on all Canadian imports. As the US is Canada's largest trading partner, such measures could exert considerable pressure on the Canadian economy. Chris McHaney from Global X Investments Canada pointed out that the market increasingly expects the necessity of another significant rate cut in light of the recent US posturing. Nathan Janzen from the Royal Bank of Canada noted that the previous rate cuts resemble more of an easing of the economic brakes rather than a decisive acceleration. At the same time, the economic environment in Canada remains characterized by a rising unemployment rate and low growth. The unemployment rate recently rose to 6.8 percent, while economic growth in the third quarter was just one percent thanks to increased government spending.