The Bank of Canada today reduced its target for the overnight rate by 25 basis points to 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.While the global economy has been resilient to the historic rise in US tariffs, the impact is becoming more evident. Trade relationships are being reconfigured, and ongoing trade tensions are dampening. Canada’s economy contracted by 1.6% in the second quarter, reflecting a drop in exports and weak business investment amid heightened uncertainty. Meanwhile, household spending grew at a healthy pace. US trade actions and related uncertainty are having severe effects on targeted sectors, including the automotive, steel, aluminum, and lumber industries. As a result, GDP growth is expected to be weak in the second half of the year. Growth will receive some support from rising consumer and government spending, as well as residential investment, and then gradually pick up as exports and business investment begin to recover.Canada’s labour market remains soft. Employment gains in September followed two months of sizeable losses. Job losses continue to build in trade-sensitive sectors, and hiring has been weak across the economy. The unemployment rate remained at 7.1% in September, and wage growth has slowed. Slower population growth means fewer new jobs are needed to keep the employment rate steady.The Bank projects GDP will grow by 1.2% in 2025, 1.1% in 2026, and 1.6% in 2027. On a quarterly basis, growth strengthens in 2026 after a weak second half of this year. Excess capacity in the economy is expected to persist and be taken up gradually.CPI inflation was 2.4% in September, slightly higher than the Bank had anticipated. Inflation excluding taxes was 2.9%. The Bank’s preferred measures of core inflation have been sticky around 3%. The Bank expects inflationary pressures to ease in the months ahead and CPI inflation to remain near 2% over the projection horizon.With ongoing weakness in the economy and inflation expected to remain close to the 2% target, the Governing Council decided to cut the policy rate by 25 basis points. The Canadian economy faces a difficult transition. The structural damage caused by the trade conflict reduces the capacity of the economy and adds costs. This limits the role that monetary policy can play to boost demand while maintaining low inflation. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. (ICE TORONTO)

Fonte notizia: https://www.bankofcanada.ca/