- January 29, 2025
- Posted by: Melanie Scott
- Category: Market News
This morning the Bank of Canada lowered its overnight rate for the sixth consecutive time, reducing the policy rate by 25 basis points to 3% as anticipated. Governor Macklem indicated a shift in the Bank’s approach, moving from a tightening stance to a more accommodative policy aimed at supporting stable economic growth. The Bank plans to resume asset purchases in early March. While inflation remains near the 2% target, the Bank highlighted US tariffs as a “major source of uncertainty” for the Canadian economy. Following the announcement, the Canadian dollar initially fell against the US dollar and has remained around 0.25% down from yesterday’s close.
In the US, the Federal Reserve kept its rate unchanged at 4.5%, marking its first pause after three rate cuts in late 2024. The Fed cited indicators showing continued economic expansion, such as strong unemployment data and solid labor market conditions, although inflation remains slightly elevated. The next key inflation reading, the Personal Consumption Expenditures (PCE) index, is due this Friday. Following the statement, the market has adjusted its expectations for Fed easing in 2025, now pricing in two rate cuts rather than the previously anticipated four. Immediately following the Fed’s announcement, the USD is up 0.20% against a basket of major counterparts, with particular strength against EUR (up 0.28% at the time of writing) and AUD (up 0.50% at the time of writing).
Yesterday, the White House announced that tariff updates concerning Canada and Mexico would be revealed over the weekend.
Tomorrow morning, at 8:15 AM EST, the European Central Bank is expected to announce its new rate, followed by the US GDP estimate and unemployment claims at 8:30 AM EST. The ECB is anticipated to implement its first of four planned 25-basis-point cuts for the year.