Bank of Canada delivers again

Wells Fargo Research Team Wells Fargo

Summary

The Bank of Canada (BoC) delivered a large 50 bps rate cut for the second meeting in a row at today's announcement, lowering its policy rate to 3.25%.
While acknowledging an overall softening in growth, the BoC's economic assessment was somewhat balanced, noting areas of both strength and weakness within the economy. Against this backdrop, the central bank signaled a more gradual pace of easing going forward, saying rates have already been lowered substantially since June, and that further reductions in the policy rate will be evaluated one decision at a time.
In our view, today's announcement reflects some front-loading of the BoC's monetary easing plans. Our base case is for the Bank of Canada to cut its policy rate by 25 bps in January, March and April, which would see the policy rate reach a low of 2.50% in Q2-2025, earlier than we previously forecast. The risks are tilted toward further easing, especially if Canadian growth is weaker than expected or U.S. tariff policy is more aggressive than expected.

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Wells Fargo Research Team

Wells Fargo

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