Bank of Canada announces reduction in policy rate by 25 basis points
(MENAFN) On Wednesday, the bank of Canada announced a reduction in its policy rate by 25 basis points, bringing it down to 4.25 percent. This marks the third rate cut by the central bank in over four years. The overnight rate target was adjusted to 4.25 percent, with the bank rate set at 4.5 percent and the deposit rate also at 4.25 percent. The reduction comes as part of a series of cuts that began in March 2020, in response to the economic impacts of the COVID-19 pandemic.
In its statement, the Bank of Canada noted that global economic growth was approximately 2.5 percent in the second quarter. For Canada, the economy grew by 2.1 percent during the same period, driven by increased government spending and business investment. This growth was slightly above the forecast from July, although preliminary data suggested that economic activity was softer through June and July. The labor market has shown minimal changes in employment levels recently, while wage growth remains elevated compared to productivity.
The central bank reported a further slowdown in Canadian inflation to 2.5 percent in July. Core inflation measures also averaged around 2.5 percent, with the proportion of consumer price index components growing above 3 percent aligning with historical norms. Despite high shelter price inflation being a significant contributor to overall inflation, it is starting to ease. The bank also observed that inflation remains high in some service sectors.
Governor Tiff Macklem, speaking after the monetary policy meeting, explained that the decision to cut rates reflects careful consideration of inflationary pressures and broader economic conditions. The bank's Governing Council will continue to assess macroeconomic information and its implications for inflation as they guide future monetary policy decisions. The central bank also noted varied global economic performance, with stronger growth in the US, boosted tourism in the Euro-area, and challenges in China due to weak domestic demand.
MENAFN05092024000045015839ID1108638924
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.