This morning, the Bank of Canada announced that they have reduced its key interest rate. The prime rate has decreased from 7.20% to 6.95%. Therefore, for those who have a variable rate credit product, payments will decrease by $15.34 per month for every $100,000 of mortgage.
The global economy grew by around 3% during the first quarter of 2024. Inflation in most advanced economies is easing, though the pace varies by region. Oil prices and financial conditions have remained stable.
In Canada, our economy grew by 1.7% in the first quarter of 2024, which was slower than expected. Consumption grew by about 3%, and both business investment and housing activity increased. The job market is still strong, though employment growth is slower than the growth of the working-age population. Wage pressures are gradually easing, and overall, the economy has excess supply.
CPI inflation in Canada dropped to 2.7% in April. Core inflation measures also slowed, indicating continued downward momentum. However, shelter prices remain high.
Based on this, the Governing Council has decided to reduce the policy interest rate by 0.25%. Recent data gives us confidence that inflation will move towards the 2% target, but risks remain. The Bank will monitor core inflation, along with demand-supply balance, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains committed to restoring price stability for Canadians and achieving the 2% inflation target.
The next Bank of Canada announcement will be on July 24, 2024.
If you'd like to learn more about this recent announcement or would like to know how this affects you, please feel free to reach out to us and we'd be happy to help!
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