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