Loonie Strengthens After BoC Slashes Rates By 50bps Again, Blames De-Growth On Trump & Immigration The Bank of Canada just slashed rates by 50bps (to 3.25%) – as expected – and the second 50bps cut in a row as the central bank claimed growth looks weaker than expected… but they were careful to tamp down any exuberance over future cuts. The bank said it cut by 50 basis points to “support growth and keep inflation close to the middle of the 1-3% target range,” citing inflation near 2%, excess supply, and softer-than-expected growth. The decision was expected by markets and most economists in a Bloomberg survey. Slightly hawkish shift in language… The central bank said it will be “evaluating the need for further reductions in the policy rate one decision at a time.” By comparison, October’s policy statement said that “if the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further.” Who’s to blame for the slower growth? Trump and Immigration… Donald Trump’s threat to impose 25% tariffs on Canadian exports to the US has “increased uncertainty and clouded the economic outlook,” the bank said. “No one knows how this will play out in the months ahead — whether tariffs will be imposed, whether exemptions get agreed, or whether retaliatory measures will be put in place,” Governor Tiff Macklem said. Lower immigration targets mean GDP growth next year will likely be weaker than forecast in October, the bank said. Inflation impacts will likely be muted as lower immigration reduces both demand and supply. Additionally, the bank mentioned other government policies and said it won’t react to temporary effects, placing more emphasis on underlying trends in inflation. A temporary sales tax holiday will lower inflation to around 1.5% in January, but the effect

President-elect Donald Trump is considering a nominee for ambassador to Mexico who understands first-hand the perils of being a neighbor to the country and is sure to have an impact in the role. Citing two sources familiar with the situation, Semafor reported Monday that Kari Lake “is a leading contender” to be Trump’s ambassador to Mexico. Trump endorsed Lake in both her failed run for governor of Arizona in 2022, and in her run for the U.S. Senate in 2024 that came up short. She agrees with the president that a firm approach to immigration is needed and uses the term “invasion” to describe the flood of illegal immigrants that poured into the U.S. during the Biden-Harris administration. More from Semafor: “She campaigned on finishing the wall at the US southern border, increasing the number of judges who hear asylum claims, stepping up quick deportations of undocumented immigrants who cross outside official ports of entry and building additional border detention facilities.” “As US ambassador to Mexico, Lake would be responsible for engaging with Mexican President Claudia Sheinbaum’s government on a host of contentious issues, including migration, counternarcotics, and Trump’s pledge to enact new tariffs on imports.” Lake penned an op-ed in January 2022 detailing plans to create a “compact of like-minded states” to send illegal immigrants “back across the border.” “This compact will establish an interstate commission overseeing joint border security operations comprised of law enforcement resources from member states,” Lake wrote. “The compact will provide for states to not only arrest illegal immigrants crossing into Arizona but also to return them back across the border,” she added. “We will keep Washington informed of our efforts, but Arizona will not seek permission to defend ourselves. In our federalist system, states are sovereign and we will exercise our inherent powers to