December 11, 2024
The Bank of Canada cut its target interest rate by 50 basis points to 3.25%, while keeping the bank rate at 3.75% and the deposit rate at 3.25%. The main points of the monetary policy statement were:
The Bank continues its policy of normalizing the balance sheet.
The global economy is developing as expected, with:
A strong US economy, with strong consumption and a strong labor market.
Weaker growth in the euro area.
Growth in China is supported by policy measures and strong exports, but household spending is weak.
Easing global financial conditions and a depreciation of the Canadian dollar.
In Canada:
GDP growth in the third quarter was 1%, below expectations, as business investment, inventories and exports weakened.
Consumer spending and housing activity rose, indicating the impact of lower interest rates.
The unemployment rate rose to 6.8% in November, as employment growth slowed relative to the labor force.
Wage growth remains high, although showing signs of easing.
Policy measures affecting growth and inflation expectations:
Reducing immigration is expected to reduce GDP growth next year.
Federal and provincial policies, such as the suspension of the GST and one-time payments, affect demand and inflation.
Increased uncertainty over potential US tariffs on Canadian exports.
CPI inflation is around 2% and is expected to remain close to target over the next two years.
Inflationary pressures in havens and commodity prices have slowed.
The temporary GST holiday will reduce inflation, but the effects will reverse once it ends.
The Bank of Canada has cut interest rates aggressively since June to support growth and keep inflation within its 1-3% target range.
Future rate decisions will depend on incoming data and inflation expectations.
The Bank remains committed to maintaining price stability for Canadians with an inflation target of 2%.