Economists expecting sixth straight — but more modest — rate cut from Bank of Canada

January 28, 2025

Economic forecasts suggest the Bank of Canada will likely lower its key policy rate by a quarter of a percentage point on Wednesday in light of recent inflation and jobs data, bringing it down to three per cent.

The quarter-point cut would mark a slowdown from the central bank’s two previous supersized cuts. It slashed its key rate by half a percentage point in October and December as inflation hovered at or below its two per cent target.

Canada’s annual inflation rate fell to 1.8 per cent in December, largely on the back of the federal government’s temporary GST tax break.

“(With) inflation data, we saw all the numbers coming down, so that is a positive sign,” said Tu Nguyen, an economist at RSM Canada.

She said the latest jobs data from Statistics Canada also point to the likelihood of a modest cut this go-round.

Canada’s labour market added 91,000 jobs in December as the unemployment rate dipped 0.1 percentage points to 6.7 per cent, according to the latest labour force survey.

The report also highlighted decelerating wage growth, with average hourly wages rising 3.8 per cent year-over-year in December — the slowest growth since May 2022.

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