The Bank of
Canada (BoC) lowered its benchmark interest rate by 25 basis points to 4.25 per
cent on Wednesday, as widely expected. This represented the third straight decrease in the BoC’s key interest rate.
In its policy
statement, the Canadian central bank noted:
- Canada’s 2.1%
economic growth in the second quarter was slightly stronger than the BoC forecast
in July, but preliminary indicators suggest that economic activity was soft
through June and July;
- Domestic labour
market continues to slow, but wage growth remains elevated relative to
productivity;
- Inflation
slowed further to 2.5% in July, as expected;
- High shelter
price inflation is still the biggest contributor to total inflation but is
starting to slow. Inflation also remains elevated in some other services;
- With
continued easing in broad inflationary pressures, Governing Council decided to
reduce its policy rate by a further 25 basis points;
- Excess supply
in economy continues to put downward pressure on inflation, while price
increases in shelter and some other services are holding inflation up.
Governing Council is carefully assessing these opposing forces on inflation.
- Monetary
policy decisions will be guided by incoming information and the policymakers’
assessment of their implications for the inflation outlook;
- BoC remains
resolute in its commitment to restoring price stability