Bank of Canada lowers rates, sees growth steady through 2027

The Bank of Canada (BoC) cut its benchmark interest rate to 2.25% on Wednesday, a move that was generally expected by markets. The central bank's most recent policy statement, the first since January, provided a clearer picture of how US trade moves are affecting Canada's economy and inflation outlook.

The Bank of Canada now forecasts 1.2% GDP growth in 2025, 1.1% in 2026, and 1.6% in 2027, indicating a gradual but consistent recovery. Inflation is predicted to hover near the 2% target for the projection period, albeit underlying price pressures remain slightly excessive at roughly 2.5%.

Policymakers highlighted that the current rate level is suitable for stabilizing inflation while cushioning the economy during a period of structural restructuring. However, the Governing Council reaffirmed that it stands ready to change policy if inflation or economic trends depart from expected levels.