OTTAWA, Dec. 11 (Xinhua) -- The Bank of Canada on Wednesday reduced its target for the policy rate by 50 basis points to 3.25 percent.
The central bank said in a news release that with inflation around 2 percent, the economy in excess supply, and recent indicators tilted toward softer growth than projected, it decided to reduce the policy rate to support growth and keep inflation close to the middle of the 1 percent to 3 percent target range.
It has reduced the policy rate substantially since June and consumer price index inflation has been about 2 percent since the summer, and is expected to average close to the 2 percent target over the next couple of years, the bank said.
According to the release, the Canadian economy grew by 1 percent in the third quarter, below the bank's October projection, and the fourth quarter also looks weaker than projected. In addition, the possibility the incoming U.S. administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook.
Reductions in targeted immigration levels suggest gross domestic product growth next year will be below the bank's October forecast. The effects on inflation will likely be more muted, given that lower immigration dampens both demand and supply, the bank said.
Other federal and provincial policies, including a temporary suspension of the goods and services tax on some consumer products, will affect the dynamics of demand and inflation, said the Bank of Canada.
