And it happened again, Bank of Canada reduces policy rate by 25 basis points to 4¼%

The Bank of Canada’s Rate Cut – Wednesday September 4, 2024

The Bank of Canada has once again adjusted its monetary policy. In a move aimed at stimulating economic growth and combating inflationary pressures, the bank has reduced its target for the overnight rate to 4¼%. This decision is part of a broader strategy to normalize the balance sheet and maintain a healthy economic equilibrium.

Globally, the economy continues to exhibit mixed signals. While the United States and Eurozone have shown signs of resilience, China’s economic growth has been hampered by weak domestic demand. Despite these regional variations, inflation rates have generally been moderating. In Canada, the economy expanded by 2.1% in the second quarter, driven primarily by government spending and business investment. However, recent data suggests a slowdown in economic activity, and the labor market has been sluggish.

Inflation in Canada has been on a downward trajectory. In July, the consumer price index rose by 2.5%, marking a significant decline from previous months. While shelter price inflation remains a contributing factor, it is showing signs of easing. The Bank of Canada’s preferred measures of core inflation have also stabilized around 2½%.

Given the ongoing moderation in inflationary pressures and the persistent excess supply in the economy, the Governing Council has decided to lower the policy interest rate by an additional 25 basis points. This decision reflects a careful assessment of the opposing forces influencing inflation and is guided by the latest economic data. The Bank remains committed to restoring price stability for Canadians.

The next announcement regarding the overnight rate target is scheduled for October 23, 2024. At that time, the Bank will also release its updated Monetary Policy Report, providing a comprehensive outlook for the economy and inflation.

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