The Bank of Canada's Governing Council convened to discuss the monetary policy decision announced on October 23, 2024. The deliberations were part of the third stage in the bank's decision-making process, following comprehensive staff briefings and recommendations.
The meetings commenced on October 15, 2024, under the leadership of Governor Tiff Macklem. Other attendees included Senior Deputy Governor Carolyn Rogers and Deputy Governors Toni Gravelle, Sharon Kozicki, Nicolas Vincent, and Rhys Mendes.
Discussions began with an assessment of the international economy. In the United States, growth surpassed expectations due to strong consumer spending while inflation eased gradually. However, core measures of U.S. inflation might take longer to normalize than anticipated. In China, stimulus measures appeared effective in preventing further economic decline but their long-term impact remains uncertain. Members also noted ongoing softness in larger euro area economies.
Global financial conditions have improved since July with declining bond yields and narrowing credit spreads. This environment has reduced borrowing costs for companies and supported demand.
In Canada, GDP growth was about 2% in the first half of the year but is expected to slow slightly in the second half. The labor market remains soft with a rising unemployment rate and reduced hiring impacting young people and newcomers significantly.
Members discussed population growth prospects influenced by recent federal government announcements restricting non-permanent residents' inflow. These restrictions align with assumptions from July about slowing population growth next year.
Consumption per capita declined in Q2 due to higher interest rates affecting mortgage holders' disposable income and incentivizing savings. Members anticipate these factors will diminish over time as lower interest rates should encourage spending on interest-sensitive goods and services.
Business investment growth has slowed amid subdued business conditions but firms remain optimistic about export sales driven by strong U.S. demand and energy exports boosted by projects like Trans Mountain Expansion.
Housing discussions highlighted that lower interest rates are expected to stimulate residential investment though current activity remains muted possibly due to potential buyers awaiting lower mortgage rates.
Overall economic growth has been below potential with considerable slack remaining. Inflation fell faster than projected largely due to declining global oil prices though wage-related inflation pressures have eased somewhat.
With inflation around target levels at 1.6% as of September, members considered implications for monetary policy agreeing on reducing restrictiveness by cutting policy rate by 50 basis points to 3¾%. This decision reflects confidence that upward pressures on inflation will continue decreasing while addressing labor market softness requiring stronger economic growth absorption capacity for excess supply.
Future path considerations suggest further reductions if economic conditions evolve as expected ensuring balanced focus between keeping inflation near target amidst uncertainties surrounding drivers influencing both growth & inflation dynamics guiding decisions meeting-by-meeting based upon incoming data insights maintaining balance sheet normalization through maturing bonds roll-off strategy continuation plans accordingly aligned towards overarching objectives fulfillment progressively achieved systematically iteratively implemented pragmatically operationalized coherently executed methodically realized efficiently effectuated sustainably attained holistically envisioned comprehensively strategized integrally coordinated seamlessly orchestrated meticulously calibrated effectively optimized proficiently managed competently administered adeptly facilitated expertly navigated skillfully steered judiciously directed prudently governed responsibly regulated appropriately modulated suitably 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