Canada Monetary Policy
Research Brief

Monetary easing cycle continues at fast pace. For the second-consecutive meeting, Canada’s central bank lowered its overnight rate by 50 basis points, bringing it to 3.25 per cent. This is down 175 basis points from the peak reading of 5.0 per cent in June, as a weakening economy supports the need for a less restrictive monetary environment. As to why they enacted another outsized rate cut, the Bank of Canada cited slower than expected GDP growth in the third quarter, at-target inflation, a fast-rising unemployment rate and recent policy changes set to curb population growth as their main reasons. Other federal and provincial policies – including a temporary suspension of GST on some products, the potential one-time payment to consumers and changes to mortgage rules – were also mentioned by Canada’s monetary authority. However, the Bank stated they plan to look through some of these temporary effects and focus on underlying trends to guide them on future policy decisions.