The Bank of Canada reduced its overnight target rate by 25 basis points to 4.50% on 24 July 2024, delivering its second consecutive cut as the Governing Council assessed that progress on inflation and easing conditions in the labour market justified continued monetary policy normalisation. The decision was published in the bank's fixed announcement date press release.
Having cut for the first time in four years at its June 2024 meeting, the Bank of Canada has now moved twice in succession.
INFLATION PROGRESS AND LABOUR MARKET EASING CITED
The Governing Council cited continued progress on inflation as a key rationale for the rate reduction. Canadian consumer price growth has moderated from the multi-decade highs recorded in 2022, and the bank indicated that underlying inflation measures were moving in a manner consistent with a return to the 2.0% target.
Alongside the inflation data, the Bank of Canada pointed to easing conditions in the labour market as supporting the case for a cut.
The statement confirmed the data-dependent framing that the bank has adopted for this easing phase, indicating that the pace of future adjustments would depend on how economic conditions and inflation develop over the coming months rather than on a fixed path of predetermined cuts.
CUMULATIVE EASING
Two consecutive 25 basis-point reductions, taken together, represent a 50 basis-point cumulative easing from the 5.00% peak and take the overnight rate back to its lowest level since June 2023.
The Bank of Canada's next fixed announcement date is in September 2024.