North of the border, though, the Bank of Canada went ahead with its sixth cut in a row, this one a modest 25 basis points, bringing its interest rate down to 3%. The bank noted an inflation rate of about 2%, a soft labor market, and an unemployment rate of 6.7% in December – and looked ahead to a potentially rocky 2025 for the country economically, even as it expects GDP growth to pick up this year. Maybe.
Immigration rates are slowing in Canada, and the threat of Trump tariffs could drive the country into a recession and send inflation soaring. The Canadian Chamber of Commerce warns that a 25% duty alongside retaliatory tariffs would cost Canada 2.6% of GDP per year – roughly CA$78 billion, while the US economy would take a 1.6% percent hit, coming in at US$467 billion.
Should that happen, the two central banks may quickly align themselves on the need for more, perhaps steeper, rate cuts.
