Loonie declines after BOC interest rate decision
The Canadian dollar fell against most major rivals after the BOC’s policy decisions today.
The Bank of Canada voted to cut interest rates by 25 basis points to 3.0% as expected by market analysts.
It’s the sixth such rate cut in a row since June, with the bank basing the decision on inflation rates approaching the 2% target.
The press release pointed to clues that Canada’s economic activities are gaining momentum, with recent rate cuts underpinning the economy.
However, overall economic outlook remains uncertain due to looming US tariffs.
US President Donald Trump threatened a 25% tariff on Canadian imports starting next week.
The BOC reduced its estimates for GDP growth in Canada to 1.8% in both 2025 and 2026, down from 2.1% and 2.3% respectively.
The outlook is based on the expected reduction in population growth in 2026 due to changes in immigration goals, and as political uncertainty grows.
The outlook also hasn’t taken into account the implementation of Trump’s tariff threats, which would complicate things further.
The BOC expects more interest rate cuts in 2025, but will take a more gradual path, unlike the heavy and subsequent cuts undertaken in 2024.
On trading, the Canadian dollar fell 0.3% as of 20:44 GMT to 0.6932.
Aussie
The Australian dollar fell 0.3% as of 20:44 GMT against the greenback to 0.623.
Earlier government data showed Australia’s consumer prices rose 0.2% m/m, while analysts expected a rise of 0.3%.
On a yearly basis, Australian consumer prices rose 2.5% as expected in December.
The US Dollar
The dollar index rose 0.1% as of 20:36 GMT to 108.02, with a session-high at 108.3, and a low at 107.7.
The Federal Reserve held interest rates unchanged today at 4.5% as expected by most analysts.
It pointed to the steady economic growth and strong labor conditions, while unemployment held at low levels in recent months.
However, the Fed’s statement noted that US inflation remains at high levels, with the central bank still aiming at achieving the 2% inflation target in the long term.
The Fed will continue to reduce its holdings of treasury and financial bonds overall, and stands ready to amend monetary policies when needed.
Bank of Canada cuts rates to 3%
The Bank of Canada voted to cut interest rates by 25 basis points to 3.0% as expected by market analysts.
It’s the sixth such rate cut in a row since June, with the bank basing the decision on inflation rates approaching the 2% target.
The press release pointed to clues that Canada’s economic activities are gaining momentum, with recent rate cuts underpinning the economy.
However, overall economic outlook remains uncertain due to looming US tariffs.
US President Donald Trump threatened a 25% tariff on Canadian imports starting next week.
The BOC reduced its estimates for GDP growth in Canada to 1.8% in both 2025 and 2026, down from 2.1% and 2.3% respectively.
The outlook is based on the expected reduction in population growth in 2026 due to changes in immigration goals, and as political uncertainty grows.
The outlook also hasn’t taken into account the implementation of Trump’s tariff threats, which would complicate things further.
The BOC expects more interest rate cuts in 2025, but will take a more gradual path, unlike the heavy and subsequent cuts undertaken in 2024.
US crude stocks climb after nine weeks of drawdowns
The Energy Information Administration reported a buildup of 3.5 million barrels in US crude stocks last week to 415.1 million barrels, while analysts expected an increase of 1.1 million barrels.
Gasoline stocks jumped by 3 million barrels to 248.9 million barrels, while distillate stocks fell by 5 million barrels to 124 million barrels.