The Economics and Statistics Division maintains archives of previous publications for accountability purposes, but makes no updates to keep these documents current with the latest data revisions from Statistics Canada. As a result, information in older documents may not be accurate. Please exercise caution when referring to older documents. For the latest information and historical data, please contact the individual listed to the right.
<--- Return to Archive
For additional information relating to this article, please contact:
January 29, 2025BANK OF CANADA MONETARY POLICY The Bank of Canada reduced its target for the overnight rate by 25 basis points to 3.00%, with the Bank rate reduced to 3.25% and the deposit rate down to 2.95 %. Effective January 30, the deposit rate will be set at 5 basis points below the Bank’s policy interest rate to improve the effectiveness of monetary policy implementation. The Bank is also announcing its plan to complete the balance sheet normalization and will restart asset purchases early in March. This transition will be gradual so that the balance sheet stabilizes and then grows modestly, in line with the economy.
Bank of Canada has presented the economic outlook without incorporating any new US tariffs, although it does recognize that the threat of tariffs is already affecting financial markets and business decisions. Setting aside the US tariffs, the upside and downside risks to the outlook are reasonably balanced.
Growth in Canadian economy was slower than expected in the third quarter of 2024, but there is evidence of a pickup in activity despite the slowdown in population growth. Past interest rate cuts are contributing to an increase in household spending and the economy remains in modest excess supply. Labour market is still soft and there are signs of slowed wage growth. Unemployment rate is slightly higher than it was at the time of the October Report at 6.7% in December, with youth and newcomers continuing to be the most effected.
Inflation in Canda has been around 2% since August 2024 and for most major components has remained below historical averages. Shetler price inflation is elevated and is easing slowly. Inflation is projected to be volatile thorough March. The temporary GST/HST tax holiday will continue to impact the volatility. CPI inflation is projected to be around 2.3% in 2025 and 2.1% in 2026.
Global economic growth remains around 3.0% and headline inflation is close to central bank targets, which is broadly in line with the October Report. These projections are more uncertain due to US President’s threat to impose significant tariffs as well as several major economies experiencing heightened political uncertainty. US economic growth to remain strong in 2025 and to moderate to 2.3% in 2026. Euro Area GDP is expected to grow around 0.8% in 2025 and to strengthen to about 1.3% in 2026. China’s economy is expected to grow at 4.9% in 2025 and to 4.1% in 2026 with the stabilization of manufactured export prices.
The Canadian economy is expected to grow from 1.3% in 2024 to 1.8% in 2025 and 2026. Growth in potential output is projected to slow from 2.5% in 2024 to 1.5% in 2025 and 2026. GDP growth is anticipated to outpace growth in potential output in 2025 and 2026, absorbing excess supply. Population is assumed to slow to 0.5% after reaching about 2.3% growth in second half of 2024.
Consumption growth is expected to ease over the next few years. On a per person basis, growth is projected to pick up to around 1.0% in 2025 and 2026, supported by lower interest rates and growth in income and household wealth. Residential investment is expected to be robust in 2025 at 6.0% and to slow to 2.6% in 2026. Growth in business investment is expected to increase, but remain modest.
Further decisions will be guided by data and the assessment of the implications for the inflation outlook as well as global trade policies.
The next scheduled date for announcing the overnight rate is March 12, 2025. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the Monetary Policy Report on April 16, 2025.
Source: Monetary Policy press release; Monetary Policy Report, January 2025
<--- Return to Archive
