The Bank of Canada today reduced its target for the overnight rate to 4½%, with the Bank Rate at 4¾% and the deposit rate at 4½%. The Bank is continuing its policy of balance sheet normalization.

On June 5, 2024, the Bank of Canada announced a reduction in its target for the overnight rate to 4¾%, with the Bank Rate now at 5% and the deposit rate also at 4¾%. This decision, part of the Bank’s ongoing balance sheet normalization policy, comes amidst a mixed global economic backdrop and signs of easing inflation in Canada.

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 today increased its target for the overnight rate to 4¼%, with the Bank Rate at 4½% and the deposit rate at 4¼%. The Bank is also continuing its policy of quantitative tightening.

Inflation around the world remains high and broadly based. Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October Monetary Policy Report (MPR). In the United States, the economy is weakening but consumption continues to be solid and the labour market remains overheated. The gradual easing of global supply bottlenecks continues, although further progress could be disrupted by geopolitical events.