Bank of Canada Cuts Policy Rate by 50 Basis Points to 3.75%
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.
Source: The Bank of Canada. Ottawa, Ontario | October 23, 2024
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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