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05.06.2024

BoC lowers its benchmark interest rate to 4.75%, as widely expected

The Bank of Canada (BoC) reduced its benchmark interest rate by 25 basis points to 4.75 per cent on Wednesday, as widely expected. This marked the first cut in the BoC’s key interest rate since March 2020, when the COVID-19 pandemic began. 

In its policy statement, the Canadian central bank noted:

- Canada's economic growth resumed in the first quarter of 2024 but the first-quarter GDP growth (1.7%) was slower than the BoC forecast;

- Labour market data show businesses continue to hire, although employment has been growing at a slower pace;

- Wage pressures remain but look to be moderating gradually;

- Overall, recent data suggest the economy is still operating in excess supply;

- CPI inflation eased further in April. Indicators of the breadth of price increases across components of the CPI have moved down further and are near their historical average, but shelter price inflation remains high;

- With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points;

- Recent data has increased the BoC's confidence that inflation will continue to move towards the 2% target;

- Nonetheless, risks to the inflation outlook remain;

- Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour;

- BoC remains resolute in its commitment to restoring price stability

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