The Bank of Canada has reduced its target overnight rate to 3.25% in a move to support economic growth amid softer-than-expected indicators. This blog post delves into the reasons behind the rate cut, including global economic trends, domestic GDP performance, and evolving inflation dynamics. Learn about the impact of new policy measures, such as the GST holiday and immigration adjustments, and explore how these factors shape the economic outlook for Canadians. Stay informed about the Bank’s commitment to maintaining price stability and what this means for households, businesses, and investors in the months ahead.

The Consumer Price Index (CPI) in Canada rose 5.2% YoY in February, showing the largest deceleration in the CPI since April 2020, following a 5.9% increase in January. The YoY deceleration in February 2023 was attributed to the base-year effect, which was due to a steep monthly increase in prices in February 2022 (+1.0%). Excluding food and energy, prices were up 4.8% YoY, while all-items excluding mortgage interest cost rose 4.7%. The CPI increased 0.4% on a monthly basis, with Canadians paying more in mortgage interest costs in February, partially offset by a decline in energy prices. Although inflation has slowed down, prices remain elevated, with an increase of 8.3% compared to 18 months ago.

The Bank of Canada has decided to maintain its target for the overnight rate at 4½%, with the Bank Rate at 4¾% and the deposit rate at 4½%. This announcement is expected to add to the already strong real estate market in Toronto, which has seen increasing prices due to historically low levels of supply.