With news of a shrinking Canadian economy, the Bank of Canada has cut its key interest rate once more.
The Bank announced on Wednesday morning that its overnight interest rate will be reduced from 2.5 percent to 2.25 percent.
The bank rate has also been lowered, from 2.75 per cent to 2.5 per cent. The deposit rate has been reduced from 2.45 percent to 2.2 percent.
After the last rate cut in mid-September, the Canadian economy contracted by 1.6 per cent. The Canadian dollar showed slight depreciation against the U.S. dollar. However, the price of oil has been stable, and Chinese exports to the U.S. have been offset by higher exports to other nations.
The Bank said the global economy is showing evidence of slowing investment.
"While the global economy has been resilient to the historic rise in US tariffs, the impact is becoming more evident," read a statement from the Bank. "Trade relationships are being reconfigured, and ongoing trade tensions are dampening investment in many countries. In the Monetary Policy Report (MPR) projection, the global economy slows from about 3.25 per cent in 2025, to about three per cent in 2026 and 2027."
The Bank did acknowledge some economic growth from our neighbours.
"In the United States, economic activity has been strong, supported by the boom in AI investment," read the statement. "At the same time, employment growth has slowed, and tariffs have started to push up consumer prices."
The Bank added that, make no mistake, tariffs are having an impact on Canada.
"The Canadian economy faces a difficult transition," read the statement. "The structural damage caused by the trade conflict reduces the capacity of the economy and adds costs. This limits the role that monetary policy can play to boost demand while maintaining low inflation. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval."
The next rate announcement is on Wednesday, December 10.
