CA BOC Rate Statement

Good morning. I’m pleased to be here with Senior Deputy Governor Carolyn Rogers to discuss our policy decision. Today, we lowered the policy interest rates by 50 basis points. This is our fifth consecutive decrease since June and brings our policy rate to 3¼%. Monetary policy has worked to bring inflation back to the 2% target. Our policy focus now is to keep inflation close to target. Let me outline what we’re seeing in the economy, and how that played into our decision. In the United States, the economy continues to show ...

The Bank of Canada today reduced its target for the overnight rate to 3¼%, with the Bank Rate at 3¾% and the deposit rate at 3¼%. The Bank is continuing its policy of balance sheet normalization. The global economy is evolving largely as expected in the Bank’s October Monetary Policy Report (MPR). In the United States, the economy continues to show broad-based strength, with robust consumption and a solid labour market. US inflation has been holding steady, with some price pressures persisting. In the euro area, recent indicators point to weaker growth. In China, recent policy actions combined with strong exports are supporting growth, but household spending remains subdued. Global financial conditions have eased and the Canadian dollar has depreciated in the face of broad-based strength in the US dollar. In Canada, the economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports. In contrast, consumer spending and housing activity both picked up, suggesting lower interest rates are beginning to boost household spending. Historical revisions to the National Accounts have increased the level of GDP over the past three years, largely reflecting higher investment and consumption. The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force. Wage growth showed some signs of easing, but remains elevated relative to productivity. A number of policy measures have been announced that will affect the outlook for near-term growth and inflation in Canada. Reductions in targeted immigration levels suggest GDP growth next year will be below the Bank’s October forecast. The effects on inflation will likely be more muted, given that lower immigration dampens b post: *BANK OF #CANADA CUTS KEY RATE 50 BPS TO 3.25%, MATCHING EST. - BBG *MACKLEM: 'WE ANTICIPATE A MORE GRADUAL APPROACH' TO POLICY *BOC DROPS PROMISE OF FURTHER CUTS IF FORECASTS MATERIALIZE *BOC: US TARIFF THREAT INCREASES UNCERTAINTY, CLOUDS OUTLOOK post: BOC: WE WILL EVALUATE NEED FOR FURTHER RATE CUTS ONE DECISION AT A TIME. post: BOC: CANADIAN Q4 GROWTH LOOKS WEAKER THAN EXPECTED.

Consumer price index (CPI) inflation has fallen and is now around 2%. The recent decline in inflation reflects both lower energy prices and weaker underlying inflationary pressures. Overall, inflation is near target, but the distribution of inflation rates across CPI components remains wider than usual. Over the projection horizon, inflation is expected to remain close to the 2% target. Core inflation is forecast to decline gradually. There are both upside and downside risks to the Bank of Canada’s outlook for inflation, and the Bank is equally concerned with inflation rising above the target or falling below it. The Canadian economy has evolved broadly as anticipated. Relative to the July forecast, growth in the second quarter was slightly stronger than expected, while the third quarter looks weaker. Gross domestic product (GDP) per person continues to decline. Energy exports are rising, and growth in both business investment and government spending is slowing. The Canadian economy continues to be in e post: BANK OF CANADA GOVERNOR TIFF MACKLEM SAYS DATA AND BANK SURVEYS SUGGEST WE ARE BACK TO LOW INFLATION; THIS IS GOOD NEWS FOR CANADIANS post: MACKLEM: NOW OUR FOCUS IS TO MAINTAIN LOW, STABLE INFLATION; WE NEED TO STICK THE LANDING post: MACKLEM: BANK CUT BY 50 BPS BECAUSE INFLATION IS BACK TO THE 2% TARGET AND WE WANT TO KEEP IT THERE