The Bank of Canada, the first G7 central bank to start cutting rates back in June, could be among the first to stop cutting, Export Development Canada chief economist Stuart Bergman suggests. Weakness in Canada's economy prompted aggressive action by the Bank of Canada. Now with inflation tamed and forecast to average 2.1% in 2025, closing a widening output gap and arresting the deterioration in the labor market will be the bank's main priority, Bergman says. The country's export credit agency expects the BoC to cut rates three times this year, reaching a target rate of 2.75% by September. It also expects the Canadian dollar to average $0.70 in 2025, put under pressure by a weaker Canadian growth outlook and expectations the Fed will be cautious about rate cuts amid policy shifts in the country. - Robb Stewart

Basis Points The U.K.'s residential sales market continued to strengthen as house prices increased and new buyer inquiries rose further in December, according to data from the Royal Institution of Chartered Surveyors. The latest residential market survey said that overall house sales continued to see an upward trend, with December being the sixth consecutive month in which respondents indicated an increase in houses being listed for sale. The survey said all regions in the country reported increased prices, with Northern Ireland and Scotland reporting the strongest price growth. The Bank of England may have to lower borrowing costs more rapidly than it has to date in order to reduce the risk of the U.K. sliding into recession, one of its rate-setters said Wednesday. In his first speech since joining the central bank's policy-setting panel in September, Alan Taylor said the U.K. faces an increased risk of weaker economic growth and a more rapid fall in inflation than the BOE had anticipated. Germany notched up five years of stagnation after the economy shrank 0.2% in 2024, DWS economist Martin Moryson says in a note. While global trade increased by 3.1% overall, German exports fell by 0.8%, he says, citing data from the International Monetary Fund. The crisis in industry has continued, and investment fell by almost 3%. (Dow Jones Newswires) The Australian dollar could weaken slightly in coming months against a firm U.S. dollar and amid Chinese economic headwinds, Rabobank's Jane Foley says in a note. Australia's mining investment boom in the early part of this century makes it "impossible to ignore the impact that Chinese demand has had on Australian living standards and its broad set of fundamental factors," she says. (DJN) About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to [vicky.huang@wsj.com].

This article is a text version of a Wall Street Journal newsletter published earlier today.


(END) Dow Jones Newswires

01-16-25 0741ET