Bank of Canada Cuts Rate, but not the Fed
Bank of Canada Cuts Rate, but not the Fed
On January 29th, the Bank of Canada announced ¼ percent (25 basis points), while the Federal Reserve kept interest rates unchanged.
This was the sixth consecutive interest announcement that lowered rates. The policy interest rate, the overnight rate, has fallen from 4.75% to 3% since June 2024. The Bank has also ended its program of quantitative tightening. It will restart asset purchases in early March.
According to the Monetary Policy Report (MPR), inflation has been close to the 2% target and economic growth is picking up. “Since the scope and duration of a possible trade conflict are impossible to predict, the MPR projection we published today provides a baseline forecast in the absence of tariffs” according to remarks from Tiff Macklem, Governor, Bank of Canada.
Tariffs were not mentioned in the press release from Federal Reserve Chair, Jerome Powell, as U.S. rates were left unchanged, as expected. The situation was summarized, “Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.” The target range for the federal funds rate remains 4¼ to 4½ percent.
The next opportunities for the Bank of Canada and the Federal Reserve to adjust interest rates are March 12th and March 19th, respectively. Both dates follow the implementation date for tariffs on Canada mentioned by President Trump.