Ottawa, October 23, 2024 – The Bank of Canada announced today that it has reduced its target for the overnight rate by 50 basis points to 3.75%, with the Bank Rate now at 4% and the deposit rate at 3.75%. This decision comes as the Bank continues its policy of balance sheet normalization while responding to changes in both domestic and global economic conditions.
The Bank’s updated economic outlook suggests the global economy will grow at about 3% over the next two years, with stronger-than-expected growth in the U.S. but subdued activity in China. While inflation in advanced economies has moderated and is near central bank targets, the recent drop in global oil prices has contributed to easing financial conditions since July.
In Canada, economic growth remains modest. The Bank projects a GDP expansion of 1.75% in the second half of 2024, supported by improved exports due to the opening of the Trans Mountain Expansion pipeline. However, per capita consumption is softening, and the labor market remains under strain with unemployment at 6.5% in September. Population growth continues to outpace job creation, particularly affecting younger workers and newcomers. Wage growth is high relative to productivity, contributing to excess supply in the economy.
The Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026, as excess supply is absorbed and interest rate cuts stimulate demand. The inflation rate has fallen sharply from 2.7% in June to 1.6% in September, bringing it closer to the Bank’s 2% target. Core inflation measures are now below 2.5%, and expectations for inflation among businesses and consumers have largely normalized.
The Governing Council indicated that, if economic conditions evolve as expected, further rate cuts may follow, but decisions will be data-dependent. The next policy rate announcement is scheduled for December 11, 2024.
For more detailed economic projections, the Bank will release its next Monetary Policy Report on January 29, 2025.