Bank cuts rate to 3% by 25 basis points in line with expectations.

The Bank of Canada on Wednesday lowered its overnight policy interest rate by 25 basis points to 3% at the first monetary policy meeting of 2025.

Deciding in line with market expectations, the bank is also announcing its plan to complete the normalization of its balance sheet, ending quantitative tightening.

“The Bank will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy,” it noted.

The bank projected that the global economy will continue to grow by about 3% over the next two years while growth in the US was revised up, mainly due to stronger consumption, and growth in the euro area is likely to be subdued as the region copes with competitiveness pressures.

“The Bank forecasts GDP growth will strengthen in 2025. However, with slower population growth because of reduced immigration targets, both GDP and potential growth will be more moderate than was expected in October,” it added. “Following growth of 1.3% in 2024, the Bank now projects GDP will grow by 1.8% in both 2025 and 2026, somewhat higher than potential growth.”

The bank said its past interest rate cuts have started to boost the economy.