Regina 
The Bank of Canada has announced a reduction in its policy rate by 25 basis points, bringing it down to 4.25%.
The Bank Rate is now 4.5%, while the deposit rate is 4.25%.
Credit: PiggyBank/ Unsplash
Bank of Canada says the decision follows the ongoing easing of broad inflationary pressures. This move is aimed at managing the dual pressures of excess supply, dampening inflation, and persistent price increases in certain services.
Key highlights from the announcement include:
Global Economic Insights: Globally, the economy grew by approximately 2.5% in the second quarter, matching expectations outlined in the Bank’s July Monetary Policy Report. The U.S. experienced stronger-than-anticipated economic growth, primarily driven by consumer spending, although the labor market showed signs of slowing. In contrast, Europe’s economic expansion was bolstered by tourism and other services, despite weaker manufacturing output. Meanwhile, inflation has continued to moderate in both regions.
Canadian Economic Performance: In Canada, the economy expanded by 2.1% in the second quarter, slightly above projections, with government spending and business investment leading the growth. However, indicators suggest a softening in economic activity through June and July. The labour market remains sluggish with minimal changes in employment, though wage growth has stayed above productivity levels.
Inflation Dynamics: Inflation in Canada dropped to 2.5% in July, with core inflation measures averaging around 2.5%. Despite high shelter costs driving much of the inflation, these are beginning to stabilize. However, inflation remains high in other service areas.
The news release states, “Governing Council is carefully assessing these opposing forces on inflation. Monetary policy decisions will be guided by incoming information and our assessment of their implications for the inflation outlook.”
The next scheduled date for announcing the overnight rate target is on Wednesday, October 23, 2024.
