Bank of Canada (BoC) drops their rate by another 0.5%. Canadian dollar has depreciated in the face of broad-based strength in the US dollar. The recent unemployment rate rose, as employment continued to grow more slowly than the labour force. Wage growth showed some signs of easing, but remains elevated relative to productivity. The upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected.

GDP growth is weaker than projected. BoC acknowledged immigration, changes to mortgage rules, and temporary policies such as the GST suspension and stated “The Bank will look through effects that are temporary and focus on underlying trends to guide its policy decisions.” BoC’s statement appears to subtly critique the government’s temporary policy measures as economic window dressing, which lacks any meaningful economic impact.

BoC also noted increased uncertainty and clouded  economic outlook with the possibility of new tariffs on Canadian exports to US. The nod to potential US tariffs reveals Canada’s increasingly passive economic role, more passenger than driver.

Closing statement signals a definitive shift from the previous “wait and watch” approach to a clear path of rate reduction. “Going forward, we will be evaluating the need for further reductions in the policy rate one decision at a time.”

Next BoC meetings Jan 29 followed by March 12. US Fed will make their next rate announcement Dec 18, 2024.