Bank of Canada Cuts Rates by 50 bps, Frets Over Possible Trump Tariffs

• The Bank of Canada slashed its key policy rate by 50 basis points to 3.25% on Wednesday and indicated that further cuts would be more gradual, a shift from previous messaging that continuous easing was needed to support growth.
• The 50-basis-point cut, while widely expected, marks the first time since the pandemic that the central bank has implemented consecutive jumbo-sized cuts. In a Reuters poll of economists, 80%, or 21 out of 27 respondents, predicted that the bank would cut the overnight rate by 50 basis points. The rest forecast a quarter-point reduction.
• The policy rate is now at the top end of the bank's so-called neutral range, which is considered to be the band within which rates are just enough not to restrict growth but not stimulate it either.
• Canada's economy grew at an annualised rate of just 1% in the third quarter, less than the Bank of Canada had predicted. The Bank said fourth-quarter growth might be weaker than expected, and that planned reductions in immigration levels could cause 2025 growth to also fall short of forecasts.
• With Wednesday's reduction, the bank has now shrunk benchmark borrowing costs five times in a row by 175 basis points in a space of six months, making it the only major central bank to have reduced borrowing costs at such a rapid pace.

(Sources: Reuters)