Bank of Canada Lowers Policy Rate: What It Means for You

The Bank of Canada has just announced a reduction in its target for the overnight rate by 25 basis points, bringing it down to 4.75%. Alongside this, the Bank Rate is now 5%, and the deposit rate is also 4.75%. This move is part of the Bank’s ongoing efforts to normalize its balance sheet.


Globally, the economy saw a 3% growth in the first quarter of 2024, aligning well with the Bank's April Monetary Policy Report. However, the U.S. economy underperformed due to weaker exports and inventory issues, although private domestic demand stayed robust. Over in Europe and China, the economic activity picked up, with China seeing a boost from exports and industrial production despite weak domestic demand. Inflation rates in advanced economies are easing, though unevenly across different regions.


Canada's economy bounced back in the first quarter of 2024 after a sluggish second half of the previous year, achieving a GDP growth of 1.7%. Although this was lower than expected, solid consumption growth at around 3% and increased business investment and housing activity were positive signs. The job market is still growing, albeit at a slower pace than the working-age population, and wage pressures are gradually easing. Overall, the data suggests that the Canadian economy is currently operating with excess supply.


Inflation in Canada continues to decline, with the Consumer Price Index (CPI) inflation easing to 2.7% in April. Core inflation measures are also slowing, indicating a downward trend. However, shelter prices remain a notable exception, continuing to rise.


Given the consistent evidence that underlying inflation is easing, the Bank's Governing Council decided to reduce the policy interest rate. This decision reflects increased confidence that inflation is on track to meet the 2% target. Nevertheless, the Bank is keeping a close eye on various factors, including core inflation, the balance between demand and supply, inflation expectations, wage growth, and corporate pricing behaviors, to ensure price stability is maintained.


The next update on the overnight rate target is scheduled for July 24, 2024, when the Bank will also release its detailed outlook on the economy and inflation. Stay tuned for more updates, and keep an eye on how these changes might affect your financial decisions. The Bank of Canada remains dedicated to ensuring a stable economic environment for all Canadians.

If you have any questions about how this rate change affects your home buying or selling - message us! We're here to chat anytime!  905.335.4102  |

Posted by Tanya Rocca on
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