BoC delivers a 50bps rate cut just in time for the holidays.
This morning, all eyes were on the Bank of Canada as they announced their final interest rate decision for the year.
👉 Click here to read the full Bank of Canada press release.
The lead-up to today’s announcement was anything but predictable. Since the substantial rate cut in October, a mixed bag of economic data kept analysts guessing.
Then, just last Friday, Statistics Canada dropped a sobering update:
📉 Unemployment surged to 6.8% in November—the highest since September 2021.
Paired with underwhelming Q3 GDP growth, these numbers tipped the scales. In response, the Bank of Canada met market expectations, cutting the policy rate by 50 basis points.
BOC Rate Forecast
The Bank of Canada’s policy rate can typically be grouped into three categories:
- Restrictive
- Neutral (ranging between 3.25% and 2.25%)
- Accommodative
A neutral rate is one that neither boosts nor slows down the economy. With today’s decision, the policy rate has landed at the upper edge of “neutral.”
Looking ahead, most economists anticipate further rate cuts in 2025, likely targeting 2.75% as the point where the Bank of Canada might pause its current easing cycle.
Of course, this forecast hinges on a stable economic landscape—like avoiding a recession in North America.
What about fixed rates?
It’s important to remember that today’s Bank of Canada decision impacts the overnight lending rate (prime rate)—not fixed-rate mortgages.
Fixed rates march to a different beat, driven by Government of Canada bond yields, which are heavily influenced by U.S. bond yields and broader global events.
The past 45 days have been a wild ride for bond yields. At one point, fixed mortgage rates were even creeping upward, despite widespread expectations of Bank of Canada rate cuts.
📹 Check out my full analysis here.
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Bottom line: Fixed rates are expected to trend downward, but their journey is tied to U.S. and global economic shifts. The path may be less predictable than the prime rate, so stay informed!
The first 2025 Bank of Canada meeting is scheduled for January 29th
