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Economic news
23.10.2024

BoC cuts its benchmark interest rate to 3.75%, as widely anticipated

The Bank of Canada (BoC) lowered its benchmark interest rate by 50 basis points to 3.75 per cent on Wednesday, as widely anticipated. This represented the fourth straight reduction in the BoC’s key interest rate. 

In its policy statement, the Canadian central bank noted:

- Canada’s economy grew at around 2% in H1 and is expected to expand by 1.75% in H2;

- Labour market remains soft;

- Wage growth remains elevated relative to productivity growth;

- Overall, the economy continues to be in excess supply;

- GDP growth is forecast to strengthen gradually over the projection horizon, supported by lower interest rates;

- BoC sees GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026;

- CPI inflation has declined significantly from 2.7% in June to 1.6% in September;

- Inflation in shelter costs remains elevated but has begun to ease;

- With inflationary pressures no longer broad-based, business and consumer inflation expectations have largely normalized;

- BoC expects inflation to remain close to the target over the projection horizon, with the upward and downward pressures on inflation roughly balancing out;

- Governing Council decided to reduce its rate by 50 basis points to support economic growth and keep inflation close to the middle of the 1% to 3% range;

- If the economy evolves broadly in line with BoC’s latest forecast, it expects to reduce rate further;

- Timing and pace of further reductions will be guided by incoming information and assessment of its implications for the inflation outlook;

- BoC will take decisions one meeting at a time

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