New Bank of Canada Announcement: Bank of Canada reduces policy rate by 25 basis points

The Bank of Canada has announced an interest rate cut to 4.75%. This move aims to normalize the balance sheet while making borrowing more affordable for consumers.

Global and Canadian Economic Outlook

In the first quarter of 2024, the global economy grew by about 3%, with mixed performances across major economies. The U.S. saw slower-than-expected growth, Europe picked up pace, and China experienced stronger exports and industrial production.

In Canada, economic growth resumed at 1.7% in the first quarter, with solid consumption growth and increased business investment and housing activity. Although employment growth has slowed, wage pressures are gradually moderating, indicating the economy is operating with some excess supply.

Inflation 

Inflation has eased to 2.7%, and the Bank’s measures of core inflation also show downward momentum. Despite high shelter price inflation, the overall trend suggests underlying inflation is easing.

Given this context, the Governing Council decided to reduce the policy interest rate by 25 basis points, increasing confidence that inflation will continue to move towards the 2% target. The Bank remains vigilant, monitoring core inflation, economic demand and supply balance, inflation expectations, wage growth, and corporate pricing behavior.

Outlook

This rate cut makes mortgages more affordable, potentially lowering monthly payments for home buyers. As borrowing costs decrease, the real estate market becomes more accessible, presenting an excellent opportunity for those looking to purchase a home.

The next announcement on the overnight rate target is scheduled for July 24, 2024, with a full economic outlook and inflation report.

For more information, visit the Bank of Canada’s press release.

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Note: This blog post is for informational purposes only and should not be considered financial or investment advice. Please consult with a qualified professional for personalized guidance related to real estate and investment decisions.