In this blog:
What Does the Bank of Canada do?
Eight times per year, the Bank of Canada (BOC) makes a scheduled announcement about their benchmark lending rate based on data they have assessed about the current state of the Canadian economy. Any change to this rate indicates a possible change to corresponding rates, such as interest rates for mortgages and additional types of consumer loans. This is because the rate set by the bank will directly affect prime rates offered by banks and other financial lenders. For more information, take a look at our blog post breaking down four of the most frequently asked questions regarding the BOC.
Were there any Changes to the Interest Rate?
Today, the Bank of Canada made a significant move by reducing its policy interest rate by 0.5 basis points, lowering it from 4.25 percent to 3.75 percent. This decision is part of the bank’s ongoing balance sheet normalization policy, which aims to reduce asset holdings while maintaining economic stability.
What Information did the Bank Share about the Economy?
Canadian Economy
The Canadian economy has shown moderate growth, expanding by approximately 2 percent in the first half of 2024, with expectations for a 1.75 percent growth rate in the latter half. A key driver of this growth has been the Trans Mountain Expansion pipeline, which has boosted exports since operations began in May 2024.
The labour market is displaying signs of weakness, and wage growth remains elevated. The economy is currently in a state of oversupply, meaning that the availability of goods and services exceeds demand.
Looking ahead, an increase in per capita spending and slower population growth are projected to bolster economic output. The central bank anticipates GDP growth of 1.2 percent in 2024, followed by 2.1 percent in 2025 and 2.3 percent in 2026.
Canadians have experienced a sharp decline in inflation, dropping from 2.7 percent in June to 1.6 percent in September. The bank expects inflation to remain near its 2% target in the near future.
Global Economy
- On a global scale, economic growth is projected to reach about 3 percent over the next two years.
- Most advanced economies are seeing inflation levels near central bank targets after a period of easing.
- Current oil prices are approximately $10 lower than those forecasted in July’s Monetary Policy Report.
How does this Impact Me?
- For Canadians with variable-rate mortgages, lines of credit, or loans tied to the prime rate, this rate cut means lower payments moving forward.
- Generally, borrowing costs for new mortgages, loans, and lines of credit will also decrease following a rate cut by the Bank of Canada.
Will there be any Interest Rate Changes in the Near Future?
The final rate announcement of the year will take place on December 11, 2024, with an additional decrease expected at that time. Canadian Economists are predicting further rate cuts to take place throughout 2025.
