Mortgage Blog
Bank of Canada Rate Announcement - July 24, 2024
July 24, 2024 | Posted by: Ken Fadel
As was widely expected, the BoC just reduced its target for the overnight rate to 25 bps to 4.50%. This is the second consecutive rate drop announcement.
The global economy is expected to continue growing at an annual rate of about 3% through 2026. While inflation remains above target in most advanced economies, it is forecast to gradually ease. In the United States, consumption growth is moderating, and an economic slowdown is materializing.
In Canada, economic growth accelerated to approximately 1.5% for the first half of 2024 first. However, when you combine this with population growth of about 3%, there remains considerable slack in the economy. Household spending in both consumer purchases and housing, has been weak. The unemployment rate has risen to 6.4%, and wage growth is showing some signs of moderating. GDP growth is forecast to increase in the second half of 2024 and through 2025. This is based on an expectation of stronger exports and a recovery in household spending and business investment as borrowing costs ease. The BoC currently expects to see GDP growth of 1.2% this year, 2.1% next year and 2.4% in 2026.
CPI inflation fell to 2.7% in June after a slight blip in May. While broad inflationary pressures are easing, shelter price inflation remains the biggest contributor driven by high rent and mortgage interest costs. Core inflation is expected to slow to about 2.5% in the second half of 2024 and ease gradually through 2025. As always, the BoC reiterated it “remains resolute in its commitment to restoring price stability for Canadians.”
The next scheduled interest rate announcement is set for September 4, 2024.