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September 04, 2024BANK OF CANADA MONETARY POLICY The Bank of Canada reduced its target for the overnight rate to 4.25%, with the Bank rate reduced to 4.50% and the deposit rate down to 4.25%. The Bank is continuing its policy of balance sheet normalization.
Global economy expanded at 2.5% in the second quarter, in line with the Bank’s July projections. US economic growth was stronger than expected, but labour markets started to slow. Euro Area economic growth was boosted by tourism while manufacturing has softened. Oil prices are lower than assumed in the July report.
Economic growth in Canada grew roughly at 2.1% in the first quarter of 2024. This was driven by government spending and business investment.
The labour market has cooled significantly as a result of falling job vacancies, which are now near their historical averages. Unemployment rate has come up from about 5.0% in 2022 to 6.4% in June and July 2024.
Inflation has eased from 2.7% in June to 2.5% in July. The Bank’s preferred measures of core inflation averaged to about 2½% in the second half of 2024. Ongoing excess supply is lowering inflationary pressures. At the same time, price pressures in some important parts of the economy—notably shelter and some other services—are holding inflation up.
With continued evidence of inflation easing, Bank of Canada agreed to decreasing the policy interest rate by 25 basis points. The Governing Council is closely watching the balance between demand and supply, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains committed to brining price stability for Canadians.
The next scheduled date for announcing the overnight rate is October 23, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection at the same time.
Bank of Canada: Press release
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