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The full statement from the Bank of Canada on September 4, 2024:
The Bank of Canada today reduced its
target for the overnight rate to 4¼%, with the Bank Rate at 4½% and the
deposit rate at 4¼%. The Bank is continuing its policy of balance sheet
normalization.
The global economy expanded by about 2½% in the second quarter, consistent with projections in the Bank’s July Monetary Policy Report
(MPR). In the United States, economic growth was stronger than
expected, led by consumption, but the labour market has slowed.
Euro-area growth has been boosted by tourism and other services, while
manufacturing has been soft. Inflation in both regions continues to
moderate. In China, weak domestic demand weighed on economic growth.
Global financial conditions have eased further since July, with declines
in bond yields. The Canadian dollar has appreciated modestly, largely
reflecting a lower US dollar. Oil prices are lower than assumed in the
July MPR.
In Canada, the economy grew by 2.1% in the second quarter, led by
government spending and business investment. This was slightly stronger
than forecast in July, but preliminary indicators suggest that economic
activity was soft through June and July. The labour market continues to
slow, with little change in employment in recent months. Wage growth,
however, remains elevated relative to productivity.
As expected, inflation slowed further to 2.5% in July. The Bank’s
preferred measures of core inflation averaged around 2 ½% and the share
of components of the consumer price index growing above 3% is roughly at
its historical norm. High shelter price inflation is still the biggest
contributor to total inflation but is starting to slow. Inflation also
remains elevated in some other services.
With continued easing in broad inflationary pressures, Governing
Council decided to reduce the policy interest rate by a further 25 basis
points. Excess supply in the economy continues to put downward pressure
on inflation, while price increases in shelter and some other services
are holding inflation up. Governing Council is carefully assessing these
opposing forces on inflation. Monetary policy decisions will be guided
by incoming information and our assessment of their implications for the
inflation outlook. The Bank remains resolute in its commitment to
restoring price stability for Canadians.
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