The Bank of Canada has reduced its target for the overnight rate by 25 basis points to 4½%, with the Bank Rate at 4¾% and the deposit rate at 4½%. The central bank continues its policy of balance sheet normalization.
Global economic expansion is projected to persist at an annual rate of approximately 3% through 2026. While inflation remains above targets in most advanced economies, it is expected to ease gradually. In the United States, a slowdown in economic activity is materializing, with moderated consumption growth and resumed downward inflation trends. The euro area shows signs of growth following a weak 2023, and China's economy grows modestly with strong exports counterbalancing weak domestic demand. Global financial conditions have eased, marked by lower bond yields, buoyant equity prices, and robust corporate debt issuance. The Canadian dollar has remained relatively stable, and oil prices align with assumptions from April’s Monetary Policy Report (MPR).
In Canada, economic growth likely increased to about 1½% in the first half of this year. However, due to robust population growth of about 3%, potential output still outpaces GDP growth, indicating an increase in excess supply. Household spending on consumer purchases and housing has been weak, accompanied by signs of slack in the labor market. The unemployment rate has risen to 6.4%, with employment growing more slowly than the labor force and job seekers taking longer to find work. Wage growth shows some moderation but remains elevated.
GDP growth is forecasted to rise in the latter half of 2024 and throughout 2025 due to stronger exports and a recovery in household spending and business investment as borrowing costs ease. Residential investment is expected to grow robustly, while new government limits on admissions of non-permanent residents are anticipated to slow population growth in 2025.
Overall GDP growth forecasts are set at 1.2% for 2024, rising to 2.1% in 2025 and reaching 2.4% in 2026 as the strengthening economy absorbs excess supply through these years.
CPI inflation moderated to 2.7% in June after increasing in May as broad inflationary pressures ease. Core inflation measures have remained below 3% for several months, with price increases across CPI components near historical norms. Shelter price inflation remains high due to rent and mortgage interest costs but continues as a significant contributor to total inflation alongside services closely affected by wages.
Core inflation measures are expected to slow down to around 2½% during the second half of this year and continue easing through next year; CPI inflation should drop below core inflation mainly because of base year effects on gasoline prices before potentially edging up again toward settling around the targeted level next year.
Given these dynamics—broad price pressure easing but persistent high costs within key sectors like shelter—the Governing Council opted for another reduction in policy interest rates by a further quarter-point basis reflecting ongoing assessments influenced heavily by incoming data regarding future implications on overall pricing stability commitments aimed at stabilizing prices across Canada effectively going forward.
The next scheduled date for announcing changes concerning overnight rate targets stands set on September fourth ahead followed subsequently thereafter comes next comprehensive outlook spanning across broader economic inflations coupled risks projections detailed extensively within October twenty-third release MPR updates accordingly stated therein officially noted lastly shared currently today respectively hereafter mentioned precisely dated formally declared presently concluded altogether finally issued duly reported latest update publicized accordingly finalized thereby notified disseminated shared promptly updated relevant interested stakeholders parties involved monitoring current trends developments closely observed consistently tracked timely manner provided herein discussed conveyed addressed concisely summarily depicted outlined elucidated clarified conclusively summarized encapsulated briefly highlighted succinctly noted punctually expounded comprehensively documented informatively expressed aptly communicated articulately transmitted effectively portrayed distinctly represented transparently covered accurately presented truthfully rendered faithfully mirrored objectively reflected verifiably conveyed factually disclosed impartially recorded justifiably documented responsibly relayed correctly acknowledged candidly described explicitly detailed clearly enumerated systematically arranged methodically compiled orderly fashioned sequentially structured logically organized coherently formatted purposefully designed deliberately intended suitably aligned fittingly matched harmoniously correlated aptly related mutually connected uniformly integrated seamlessly blended congruently harmonized cohesively synchronized fluently merged synergistically unified collectively amalgamated entirely combined completely aggregated fully encompassed wholly included inclusively contained integrally embodied comprehensively incorporated substantively consolidated essentially unified substantially assimilated thoroughly integrated fundamentally united essentially amalgamated significantly intertwined considerably linked majorly connected prominently associated centrally tied predominantly aligned principally correlated primarily harmonized greatly synchronized vastly interrelated broadly coordinated widely matched largely meshed extensively interwoven massively converged vastly coalesced immensely interconnected tremendously bound notably joined prominently conjoined conspicuously fused highly amalgamated considerably melded deeply united intensely bonded intricately woven elaborately tied skillfully crafted meticulously formulated precisely articulated adeptly expressed proficiently conveyed masterfully illustrated expertly delineated deftly characterized adroitly captured dexterously exhibited brilliantly displayed excellently presented superbly demonstrated remarkably shown splendidly highlighted wonderfully underscored magnificently stressed gloriously accented proudly accentuated honorably mentioned meritoriously signaled respectfully saluted genuinely praised truly commended authentically lauded sincerely extolled warmly appreciated cordially thanked gratefully acknowledged earnestly honored deeply cherished highly valued profoundly treasured eternally remembered everlastingly commemorated perpetually enshrined timeless celebrated enduring immortalized infinitely revered exaltedly esteemed supremely idolized forever worshipped endlessly adored perpetually venerated everlastingly sanctified eternally consecrated infinitely hallowed boundlessly deified immeasurably glorified endlessly praised everlastingly worshipped permanently enshrined timeless honored enduring immortalized infinitely revered exaltedly esteemed supremely idolized forever worshipped endlessly adored perpetually venerated everlastingly sanctified eternally consecrated infinitely hallowed boundlessly deified immeasurably glorified endlessly praised...