OTTAWA, Jan. 29 (Xinhua) -- The Bank of Canada on Wednesday reduced its target for the policy rate to 3 percent.
The central bank said in a news release that it decided to further reduce the policy rate with inflation around 2 percent and the economy in excess supply.
Past cuts to interest rates have started to boost the economy which is expected to strengthen gradually and inflation to stay close to target of 2 percent over the next two years, said the Bank. However, if broad-based and significant tariffs were imposed, the resilience of Canada's economy would be tested, most likely leading to weaker GDP and higher prices in Canada.
According to the January Monetary Policy Report (MPR) published on Wednesday, following growth of 1.3 percent in 2024, the Canadian GDP will grow by 1.8 percent in both 2025 and 2026.
The projections are subject to more-than-usual uncertainty because of the rapidly evolving policy landscape, particularly the threat of trade tariffs by the new administration in the United States, the Bank said, adding that since the scope and duration of a possible trade conflict are impossible to predict, this MPR provides a baseline forecast in the absence of new tariffs.
The Bank said it would follow developments closely and assess the implications for economic activity, inflation and monetary policy in Canada.
The Bank also announced its plan to complete the normalization of its balance sheet, ending quantitative tightening.
It would restart asset purchases in early March in line with growth in the economy, said the Bank of Canada. ■