MNI BRIEF: Text of Bank Of Canada Interest-Rate Decision

OTTAWA—The Bank of Canada today reduced its target for the overnight rate to 3.75%, with 
the Bank Rate at 4% and the deposit rate at 3.75%. The Bank is continuing its policy of balance 
sheet normalization.

The Bank continues to expect the global economy to expand at a rate of about 3% over the next 
two years. Growth in the United States is now expected to be stronger than previously forecast 
while the outlook for China remains subdued. Growth in the euro area has been soft but should
recover modestly next year. Inflation in advanced economies has declined in recent months, and 
is now around central bank targets. Global financial conditions have eased since July, in part
because of market expectations of lower policy interest rates. Global oil prices are about $10 
lower than assumed in the July Monetary Policy Report (MPR).

In Canada, the economy grew at around 2% in the first half of the year and we expect growth of 
1.75% in the second half. Consumption has continued to grow but is declining on a per person 
basis. Exports have been boosted by the opening of the Trans Mountain Expansion pipeline. The 
labour market remains soft—the unemployment rate was at 6.5% in September. Population 
growth has continued to expand the labour force while hiring has been modest. This has 
particularly affected young people and newcomers to Canada. Wage growth remains elevated 
relative to productivity growth. Overall, the economy continues to be in excess supply.

GDP growth is forecast to strengthen gradually over the projection horizon, supported by lower 
interest rates. This forecast largely reflects the net effect of a gradual pick up in consumer 
spending per person and slower population growth. Residential investment growth is also 
projected to rise as strong demand for housing lifts sales and spending on renovations. Business 
investment is expected to strengthen as demand picks up, and exports should remain strong,
supported by robust demand from the United States.

Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026. As 
the economy strengthens, excess supply is gradually absorbed.

CPI inflation has declined significantly from 2.7% in June to 1.6% in September. Inflation in
shelter costs remains elevated but has begun to ease. Excess supply elsewhere in the economy 
has reduced inflation in the prices of many goods and services. The drop in global oil prices has 
led to lower gasoline prices. These factors have all combined to bring inflation down. The 
Bank’s preferred measures of core inflation are now below 2.5%. With inflationary pressures no 
longer broad-based, business and consumer inflation expectations have largely normalized.

The Bank expects inflation to remain close to the target over the projection horizon, with the 
upward and downward pressures on inflation roughly balancing out. The upward pressure from 
shelter and other services gradually diminishes, and the downward pressure on inflation recedes 
as excess supply in the economy is absorbed.

With inflation now back around the 2% target, Governing Council decided to reduce the policy 
rate by 50 basis points to support economic growth and keep inflation close to the middle of the 
1% to 3% range. If the economy evolves broadly in line with our latest forecast, we expect to 
reduce the policy rate further. However, the timing and pace of further reductions in the policy 
rate will be guided by incoming information and our assessment of its implications for the 
inflation outlook. We will take decisions one meeting at a time. The Bank is committed to 
maintaining price stability for Canadians by keeping inflation close to the 2% target.

Information note: The next scheduled date for announcing the overnight rate target is December 11, 2024. The 
Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on January 29, 2025.