The Bank of Canada reduced its overnight policy rate by 50 basis points to 3.75% on 23 October 2024, its largest reduction of 2024 after a series of quarter-point cuts earlier in the year. The decision brought the policy rate to its lowest level since late 2022.
Canadian inflation had fallen to 1.6% in September 2024 — below the midpoint of the Bank's 1% to 3% control range and with the Governing Council saying inflation was 'now back around the 2% target'.
EXCESS SUPPLY AND GUIDANCE
The Governing Council noted in its accompanying statement that the Canadian economy was operating below its potential output, with the economy continuing to be in excess supply.
Governor Tiff Macklem indicated that further rate reductions should be expected if the economy continued to evolve broadly in line with the Bank's projections. The 3.75% rate remained above the Bank's estimated neutral range of 2.25% to 3.25%.
PRIME RATE
Variable-rate mortgage holders benefited directly from the reduction, with the prime rate declining correspondingly.