Why the BoC just cut rates by 25 bps:
- This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada.
- Total CPI inflation is starting to reflect the fall in oil prices.
- the Bank is projecting real GDP growth will slow to about 1 1/2 per cent and the output gap to widen in the first half of 2015
- The oil price shock increases both downside risks to the inflation profile and financial stability risks
- Total CPI inflation is projected to be temporarily below the inflation-control range during 2015, moving back up to target the following year.
Full statement: http://www.bankofcanada.ca/2015/01/fad-press-release-2015-01-21/