For additional information relating to this article, please contact:
December 11, 2024BANK OF CANADA MONETARY POLICY The Bank of Canada reduced its target for the overnight rate by 50 basis points to 3.25%, with the Bank rate reduced to 3.50% and the deposit rate down to 3.25%. The Bank is continuing its policy of balance sheet normalization.
The economy is evolving as expected in the October Monetary Policy Report. US economy is showing broad growth with strong consumption and a solid labour market. US inflation is steady with some persisting price pressures. Euro Area has weaker economic growth and China's economy is recovering with the help of recent policy actions and strong exports. Canadian dollar has depreciated with easing global financial conditions and broad-based strength in the US dollar.
Canada's economy grew 1% in the third quarter, slightly below Bank's October projections. Consumer spending and housing activity both picked up boosted by lower interest rates, but were offset by lower business investment, inventories and exports. Unemployment rate rose to 6.8% in November with employment growing slower than labour force. Wage growth remains elevated relative to productivity.
Short term growth will be impacted by announced policy measures and inflation in Canada. Reduced immigration targets will likely diminish GDP growth compared to Bank's October forecast. Effects on inflation will be dampened with lower demand and supply. The Bank will look through effects that are temporary and focus on underlying trends to guide its policy decisions.
The possible new tariffs coming from the US administration increased uncertainty and clouded the economic outlook.
CPI inflation has been around 2% since summer and is expected to average close to 2% target over the next few years. With inflation around 2%, economy is in excess supply, and recent indicators show a softer growth, which guided a reduction in the interest rate to maintain inflation between 1%-3% target range.
Further decisions will be guided by data and the assessment of the implications for the inflation outlook.
The next scheduled date for announcing the overnight rate is January 29, 2025. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the Monetary Policy Report at the same time.
Source: Monetary Policy press release