The Bank of Canada has lowered its target overnight rate by 50 basis points to 3.75%, with the Bank Rate at 4% and the deposit rate at 3.75%. This move is part of its ongoing balance sheet normalization.
The Bank projects global economic growth of around 3% over the next two years, with stronger-than-expected U.S. growth but a subdued outlook for China and moderate recovery in the euro area. Global financial conditions have eased, aided by expectations of lower policy rates. Lower global oil prices have also helped reduce inflation pressures in advanced economies.
In Canada, economic growth is projected at 2% in the first half of 2024 and 1.75% in the second half. The unemployment rate reached 6.5% in September amid slower hiring, affecting younger Canadians and newcomers. GDP growth is forecast at 1.2% in 2024, strengthening to 2.1% in 2025 and 2.3% in 2026 as excess supply is absorbed.
Consumer Price Index (CPI) inflation has dropped from 2.7% in June to 1.6% in September, with shelter cost inflation starting to ease. Core inflation measures are now below 2.5%, with business and consumer expectations largely normalized.
The Bank’s Governing Council decided to reduce the policy rate to support growth and keep inflation near its 2% target. Further rate cuts are anticipated if the economy aligns with the Bank’s forecast, though timing will depend on evolving economic data.
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Deputy Prime Minister and Minister of Finance Chrystia Freeland speaks to reporters at the Liberal caucus retreat in Nanaimo, B.C., on Tuesday, Sept. 10, 2024. Photo by DARRYL DYCK /THE CANADIAN PRESS
The federal government has unveiled a series of significant changes aimed at improving access to housing.Finance Minister Chrystia Freeland announced Monday, September 16th, that the price cap for insured mortgages will increase to $1.5 million from $1 million—the first adjustment since 2012—enabling more Canadians to qualify for a mortgage with less than a 20 per cent down payment. These changes are expected to take effect in December.
“This will bring the dream of home ownership closer for more young Canadians,” Freeland said.
The government is also expanding the 30-year amortization option to cover all first-time buyers and anyone purchasing newly built homes. Freeland emphasized that these measures aim to help new buyers enter a competitive housing market and reflect the growth of Canada’s economy.
Freeland rejected concerns that these changes could further inflate housing prices, arguing that the updates reflect the country’s economic growth. “The price cap needs to keep pace with the size of the Canadian economy,” she said.
In addition to the mortgage reforms, Justice Minister Arif Virani introduced drafts for a renters’ bill of rights and a homebuyers’ bill of rights, part of the Liberals’ housing-focused platform. These drafts include protections against practices like “renovictions” and propose greater transparency for homebuyers, such as disclosing price history during title searches and preventing blind bidding in real estate transactions.
Virani underscored the importance of fairness in both renting and buying: “It’s about ensuring a level playing field.”
The announcement comes as the Liberals face mounting criticism over housing affordability, especially from younger voters. Freeland hinted at a forthcoming Fall Economic Statement but did not provide specifics, adding that the government is “absolutely not” considering a home-equity tax on primary residences.
