BoC cut its overnight rate target by 50 bps to 3.75%, as widely expected, with inflation now “back around the 2% target.” The central bank reaffirmed its easing bias, stating that if the economy continues to evolve as expected, “further reductions” in the policy rate can be expected. However, it stressed that rate adjustments will be made on a “one meeting at a time” basis.
BoC adjusted its inflation forecasts slightly lower, reducing the average CPI inflation projection from 2.6% to 2.5% for 2024, and from 2.4% to 2.2% for 2025, while maintaining the 2.0% target for 2026.
Recent data shows that headline inflation has dropped from 2.7% in June to 1.6% in September, aided by lower shelter costs, a decline in global oil prices, and consequently, lower gasoline prices. BoC’s preferred core inflation measures are now below 2.5%, and inflation expectations from businesses and consumers have “largely normalized.”
On the growth front, GDP projections remained mostly unchanged, with forecasts of 1.2% for 2024, 2.1% for 2025, and a slight downgrade from 2.4% to 2.3% in 2026. BoC expects growth to pick up gradually as interest rates decline, with stronger consumer spending, rising residential investment, and resilient export demand, particularly from the US, all contributing to the recovery.
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