Bank of Canada Cuts Rate Again

September 4, 2024 - As has been widely expected, the Bank of Canada (BoC) reduced its target interest rate today by a quarter-point to 4.25%. This is the second consecutive meeting at which the rate has been lowered. It is also continuing balance sheet normalization.

Guiding the Bank's decision is:

• The continuing decrease in per capita GDP,
• Soft economic activity in June and July (despite the 2.1% increase in GDP in Q2),
• Continued slowing in the labour market, 
• Inflation that is generally within the BoC's target range (1% to 3%) and which appears to be on a downward path from the highs we saw last summer, and
• A generally softening international economic landscape.

Potential red flags cited by the Bank were:

• Wage growth, which remains elevated relative to productivity,
• Continuing high shelter inflation, although that has begun to slow, and
• Elevated inflation in "some" other services.

Overall, the tone of the announcement was fairly dovish, and the expectation is for another rate cut at the BoC's October 23 meeting. There was no forecast for Q3 GDP, but many expect this will fall below the Bank's July forecast of 2.8%. You can read the full announcement here.