Bank of Canada rate decision cuts rates by 25 basis points, as expected

• A 25 basis point cut was 99% priced in
• Prior to the BOC, the market was pricing in 68.5 bps in easing in 2025 (67.6 bps after the announcement)
• BOC announces the end of quantitative tightening
• Will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly
• Says the cumulative reduction in the policy rate since last June is substantial
• We will be following tariff developments closely and assessing the implications for economic activity

Macklem will hold a press conference at 10:30 am ET but the opening statement was published along with the statement.

There isn’t much of a signal about what’s going to come next here in the absence of tariffs but that’s understandable given the uncertainty. The MPR says 25% US tariffs plis retaliatory measures would slash GDP growth by ~2.5 percentage points in year 1, along with potential inflation from a falling loonie.

In the aftermath of the BOC, the Canadian dollar has been choppy but is relatively unchanged.

This article was written by Adam Button at www.forexlive.com.