TORONTO, July 24, 2024 – Today, as expected, the central bank of Canada lowered the interest rate by another quarter-percentage-point which brings its policy rate down to 4.5 per cent.
At a press conference held in Ottawa this morning, Tiff Macklem, Governor of the Bank of Canada, alongside Senior Deputy Governor, Carolyn Rogers, cited three considerations for lowering the interest rate an additional 25 basis points to 4.5 percent.
- The Monetary policy is working to ease broad price pressures
- With the economy in excess supply and slack in the labour market, the economy now has more room to grow without creating inflationary pressures
- As inflation gets closer to the 2% target, the risk that inflation come in higher than expected has to be increasingly balanced against the risk that the economy and inflation could be weaker than expected.
Looking ahead, Macklem says, “we expect inflation to moderate further although progress is likely to be uneven.”
The overall weakness in the economy is pulling inflation down, while at the same time price pressures in shelter and other services are holding inflation up.,” said Macklem. He says the Bank of Canada is confident that they have the ingredients to bring inflation back to their target of 2% – it was at 2.7% in June – in place. “But the push pull in these opposing forces means the decline in the rate of inflation will likely be gradual, and there could be setbacks along the way” warns Macklem.
If inflation continues to ease, Macklem says Canadians can expect to see further cuts in the interest rate moving forward, although he warns the timing of future interest rate cuts will depend on the progression of the rate of inflation.
Other talking points at today’s news conference:
• Economic growth in Canada has picked up but is weak in comparison to population growth.
• Household spending has softened with demand for things like new cars and travel, fading. More families now focused on paying down debt rather than buying into the finer things in life.
• Canadians are finding it more difficult to find jobs and the unemployment rate has risen to 6.4%
• Economic growth is expected to increase in the second half of 2024 and through 2025.
• As borrowing costs ease so should household spending.
• Residential spending is also expect to increase.
by Terry Lankstead
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