The Bank of Canada cut interest rates by 25 basis points to 3% at its meeting moments ago, its sixth consecutive cut, and announced the end of the quantitative tightening program, the resumption of asset purchases in early March, and its plan to complete the normalization of its balance sheet.

The bank’s interest rate report stated that the expectations contained in the January Monetary Policy Report are subject to a state of greater uncertainty than usual due to the rapidly evolving political scene, especially with the threat of tariffs from the US administration.

The bank expects the Canadian economy to grow by about 1.8% in 2025 and 2026, from 1.3% in 2024, while inflation in the consumer price index is expected to remain close to 2%, with some fluctuations due to the temporary suspension of the goods and services tax.

With inflation hovering around 2% and the economy oversupplied, the Fed cut interest rates today. The cumulative rate cut since June is significant and should boost household spending, but if broad-based tariffs are imposed, the resilience of the Canadian economy could be tested. The Fed will be closely monitoring developments and assessing the implications.