The Bank of Canada has announced a reduction in its target for the overnight rate to 3¾%, with the Bank Rate set at 4% and the deposit rate at 3¾%. This move is part of the bank's ongoing balance sheet normalization efforts.
According to the Bank, global economic growth is expected to be around 3% over the next two years. The United States' economy is anticipated to grow stronger than previously forecasted, while China's outlook remains subdued. The euro area's growth has been soft but is projected to recover modestly next year. Inflation rates in advanced economies have declined recently, aligning closer to central bank targets. Eased global financial conditions since July are attributed partly to market expectations of lower policy interest rates. Additionally, global oil prices have decreased by approximately $10 compared to assumptions made in July's Monetary Policy Report (MPR).
Domestically, Canada's economy grew by about 2% during the first half of this year and is expected to see a growth rate of 1¾% in the second half. While consumption continues growing, it declines on a per-person basis. Exports have increased due to the Trans Mountain Expansion pipeline opening. However, Canada's labor market remains soft with an unemployment rate of 6.5% as of September. Population growth expands the labor force but hiring remains modest, affecting young people and newcomers particularly hard. Wage growth stays high relative to productivity gains, indicating excess supply within the economy.
The Bank forecasts gradual strengthening in GDP growth over time due mainly from reduced interest rates which should spur consumer spending per person despite slower population expansion rates ahead alongside increased residential investments fueled by housing demand boosts sales/renovations alike along strong U.S.-backed export demands.
Overall projections show GDP rising gradually: reaching levels such as +1·2%, +2·1%, & +2·3% respectively throughout upcoming years till2026 when further absorption occurs against existing surplus supplies already present within current markets today
CPI inflation dropped significantly between June’s mark @+27 % downwards toward Septembers’ latest reading @16 %. Although elevated costs remain visible across shelter-related expenses these too began easing off lately helping drive broader price reductions seen elsewhere thanks largely unto falling global crude pricing impacts lowering gasoline costs accordingly all together driving overall deflationary trends downward below desired thresholds like ~25%.
Inflationary pressures now less pervasive allow businesses consumers alike better manage expectations regarding future pricing environments stabilizing around normalized levels again ultimately balancing upward downward forces influencing said metric moving forward thereby ensuring continued adherence towards established objectives targeting median values situated amidst one three percent range ideally without deviation thereof
Given recent developments returning figures near desired benchmarks Governing Council opted slash current policy stance cutting benchmark fifty-basis-points hoping stimulate broader economic activities maintaining optimal positioning amid fluctuating landscapes awaiting additional insights guiding subsequent adjustments necessary thereafter incrementally monitoring evolving circumstances closely adjusting strategies appropriately whenever warranted through scheduled meetings upcoming months ahead aiming achieve sustained stability Canadians long term basis successfully
"The next scheduled date for announcing the overnight rate target is December 11, 2024," stated an information note from the Bank of Canada."The Bank will publish its next full outlook for the economy and inflation including risks associated therein January29th ,2025"