Canada Interest Rate

The Bank of Canada cut its key interest rate by 50bps to 3.75% in its October 2024 decision, as expected, signaled that it will continue to lower its rate should the economy develop as expected. The decision increased the pace of rate cuts following three 25bps slashes, aligning with recent data that indicated a sharp slowdown in Canadian inflation. Headline price growth fell to 1.6% in September, below the target of 2% for the first time in three years. Also, the bank noted that consumption slowed on a per capita basis and the labor market continued to soften, as the unemployment rate rose to over 6.5% for the first time in over two years, further warranting lower borrowing costs. With the new Monetary Policy Report, policymakers now expect headline inflation to remain close to the target levels for the foreseeable future as upside and downside risks to inflation are roughly balanced out. Also, the bank expects the GDP to expand 1.2% this year before growing a sharper 2.1% next year.