Commonwealth Financial President say more could be done
Economics

Key interest rate in Canada drop by .25 per cent

Jan 29, 2025 | 6:38 PM

PRINCE GEORGE—The Bank of Canada has reduced it’s key interest rate today. the central bank’s governing council says that their policy rate will be cut by a quarter-percentage point to three per cent.

It’s the sixth straight cut since June, with inflation sitting around two per cent. The governing council adds that the lower interest rates are boosting household spending and are expecting this to further strengthen the economy. However, Canada’s GDP growth projections have been revised down to 1.8 per cent for 2025 and 2026, factoring in lower population growth, due to a reduction in immigration, and a downward revision to business investment from increasing policy uncertainty.

Dan McLaren, President of Commonwealth Financial, applauds the rate cut but hopes Canadians will see a bigger cut in the future.

“It’s important to point out that while floating rates are going to fall, that’s not necessarily directly attributable to mortgage rates. They’ll tend to be a little slower and following, but that will filter through at some point in time. So it’s good news for the consumer,” explains McLaren. “Is it enough? I think, frankly, we probably need to see a more serious drop in interest rates to really kickstart the economy the way it needs to be kickstarted.”

The central bank says that while the US dollar is up, the Canadian dollar is down. McLaren says that our economy isn’t terribly productive. He cites our economic efficiencies as being resource based and that Canada has not done a good job “managing that efficiently.”

While the Bank of Canada seeks to kickstart the economy with the rate cuts, the question that remains is how will our economy be affected by potential Trump tarrifs?

“Really the practical reason is that probably in a week, we could be staring down a 25 per cent tariff from the Americans,” says McLaren. “So the Bank of Canada, along with the Federal government and Provincial government, will have to use tools and levers, probably not unlike you saw during Covid, to be able to protect us from when that’s going to happen.”

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Email: sam.bennison@pattisonmedia.com

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