On June 5, 2024, a press conference was held to discuss the latest monetary policy decision. Senior Deputy Governor Carolyn Rogers joined the discussion.
The Governing Council decided that monetary policy no longer needs to be as restrictive and lowered the policy interest rate by 25 basis points to 4.75%.
"We’ve come a long way in the fight against inflation," stated an official. "Our confidence that inflation will continue to move closer to the 2% target has increased over recent months."
Since April's Monetary Policy Report, underlying inflation has continued to ease, and economic growth has resumed. The economy is currently in excess supply, providing room for growth even as inflation recedes.
Economic growth picked up in the first quarter of this year at 1.7%, lower than projected in April's report. However, consumption growth was solid at about 3%, with increases in business investment and housing activity.
In the labor market, businesses are continuing to hire workers. Employment has been growing but at a slower pace than the working-age population, allowing worker supply to catch up with job vacancies. Elevated wage pressures appear to be moderating gradually.
Inflation remains above the 2% target, particularly shelter price inflation. However, total consumer price index (CPI) inflation has declined consistently throughout this year:
- CPI inflation eased from 3.4% in December to 2.7% in April.
- Preferred measures of core inflation decreased from about 3½% last December to about 2¾% in April.
- Three-month rates of core inflation slowed from about 3½% in December to under 2% in March and April.
- The proportion of CPI components increasing faster than 3% is now close to its historical average.
"Restrictive monetary policy is working to relieve price pressures," said an official. "With further evidence that underlying inflation is easing, it is appropriate to lower our policy interest rate."
If these trends continue and confidence grows that inflation will sustainably reach the 2% target, further cuts may be expected; however, decisions will be made one meeting at a time.
"We don’t want monetary policy to be more restrictive than it needs," they added. "But if we lower our policy interest rate too quickly, we could jeopardize progress made." Risks remain if global tensions escalate or if house prices and wage growth rise faster than expected relative to productivity.
Officials will closely monitor core inflation trends along with demand-supply balance in the economy, inflation expectations, wage growth, and corporate pricing behavior moving forward.
The floor was then opened for questions from attendees.
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