Bullet Point Summary of Bank of Canada’s October Interest Rate Announcement
- Bank of Canada: held overnight rate, 5%; Bank Rate, 5¼%; deposit rate, 5%
- Bank: continuing quantitative tightening policy
- Global economy: slowing; growth forecast: 2.9% (2023), 2.3% (2024), 2.6% (2025)
- US economy: stronger than expected
- China’s economic activity: weaker than expected
- Euro area growth: slowed further
- Inflation easing in most economies due to supply bottlenecks resolution and weaker demand
- Oil prices higher than assumed in July; Israel-Gaza war causing geopolitical uncertainty
- Canada: evidence of interest rate increases dampening economic activity and relieving price pressures; subdued consumption, softer demand for housing, durable goods, and services; weaker demand and higher borrowing costs affecting business investment
- Canada’s population surge: easing labor market pressures, increasing housing demand and consumption
- Labor market: recent job gains below labor force growth, job vacancies easing; tight labor market with wage pressures persisting
- Economic growth in Canada: weak for the next year before increasing in late 2024 and through 2025; household spending, stronger exports, business investment driving subsequent pickup; government spending contributes to growth
- Canadian economy projected to grow by 1.2% (2023), 0.9% (2024), 2.5% (2025)
- CPI inflation volatility: June (2.8%), August (4.0%), September (3.8%); higher interest rates moderating inflation in credit-based goods and services; food inflation easing but rent and housing costs remain high
- Near-term inflation expectations normalizing gradually; wages growing at 4-5%
- Bank’s October projection: CPI inflation averaging about 3½% until mid-2024 before gradually easing to 2% in 2025.
- Governing Council: policy rate held at 5%, normalization of Bank’s balance sheet continues; prepared to raise policy rate further if needed; focused on demand-supply balance, inflation expectations, wage growth, corporate pricing behavior.