Bank of Canada Rate Announcement Oct 23rd, 2024

Darrell McCollom • October 23, 2024

Bank of Canada reduces policy rate by 50 basis points to 3¾%.


FOR IMMEDIATE RELEASE

Media Relations

Ottawa, Ontario

October 23, 2024


The Bank of Canada today reduced its target for the overnight rate to 3¾%, with the Bank Rate at 4% and the deposit rate at 3¾%. The Bank is continuing its policy of balance sheet normalization.


The Bank continues to expect the global economy to expand at a rate of about 3% over the next two years. Growth in the United States is now expected to be stronger than previously forecast while the outlook for China remains subdued. Growth in the euro area has been soft but should recover modestly next year. Inflation in advanced economies has declined in recent months, and is now around central bank targets. Global financial conditions have eased since July, in part because of market expectations of lower policy interest rates. Global oil prices are about $10 lower than assumed in the July Monetary Policy Report (MPR).


In Canada, the economy grew at around 2% in the first half of the year and we expect growth of 1¾% in the second half. Consumption has continued to grow but is declining on a per person basis. Exports have been boosted by the opening of the Trans Mountain Expansion pipeline. The labour market remains soft—the unemployment rate was at 6.5% in September. Population growth has continued to expand the labour force while hiring has been modest. This has particularly affected young people and newcomers to Canada. Wage growth remains elevated relative to productivity growth. Overall, the economy continues to be in excess supply.


GDP growth is forecast to strengthen gradually over the projection horizon, supported by lower interest rates. This forecast largely reflects the net effect of a gradual pick up in consumer spending per person and slower population growth. Residential investment growth is also projected to rise as strong demand for housing lifts sales and spending on renovations. Business investment is expected to strengthen as demand picks up, and exports should remain strong, supported by robust demand from the United States.


Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026. As the economy strengthens, excess supply is gradually absorbed.


CPI inflation has declined significantly from 2.7% in June to 1.6% in September. Inflation in shelter costs remains elevated but has begun to ease. Excess supply elsewhere in the economy has reduced inflation in the prices of many goods and services. The drop in global oil prices has led to lower gasoline prices. These factors have all combined to bring inflation down. The Bank’s preferred measures of core inflation are now below 2½%. With inflationary pressures no longer broad-based, business and consumer inflation expectations have largely normalized.


The Bank expects inflation to remain close to the target over the projection horizon, with the upward and downward pressures on inflation roughly balancing out. The upward pressure from shelter and other services gradually diminishes, and the downward pressure on inflation recedes as excess supply in the economy is absorbed.


With inflation now back around the 2% target, Governing Council decided to reduce the policy rate by 50 basis points to support economic growth and keep inflation close to the middle of the 1% to 3% range. If the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further. However, the timing and pace of further reductions in the policy rate will be guided by incoming information and our assessment of its implications for the inflation outlook. We will take decisions one meeting at a time. The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.


Information note

The next scheduled date for announcing the overnight rate target is December 11, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on January 29, 2025.


Read the October 23rd, 2024 Monetary Report.


Darrell McCollum

Bank of Canada Rate Announcement Apr 16th, 2025

By Darrell McCollom • April 16, 2025
Bank of Canada holds policy rate at 2¾%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario April 16, 2025 The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. The major shift in direction of US trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations. Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally. Instead, the April Monetary Policy Report (MPR) presents two scenarios that explore different paths for US trade policy. In the first scenario, uncertainty is high but tariffs are limited in scope. Canadian growth weakens temporarily and inflation remains around the 2% target. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession this year and inflation rises temporarily above 3% next year. Many other trade policy scenarios are possible. There is also an unusual degree of uncertainty about the economic outcomes within any scenario, since the magnitude and speed of the shift in US trade policy are unprecedented. Global economic growth was solid in late 2024 and inflation has been easing towards central bank targets. However, tariffs and uncertainty have weakened the outlook. In the United States, the economy is showing signs of slowing amid rising policy uncertainty and rapidly deteriorating sentiment, while inflation expectations have risen. In the euro area, growth has been modest in early 2025, with continued weakness in the manufacturing sector. China’s economy was strong at the end of 2024 but more recent data shows it slowing modestly. Financial markets have been roiled by serial tariff announcements, postponements and continued threats of escalation. This extreme market volatility is adding to uncertainty. Oil prices have declined substantially since January, mainly reflecting weaker prospects for global growth. Canada’s exchange rate has recently appreciated as a result of broad US dollar weakness. In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter. Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation. Inflation was 2.3% in March, lower than in February but still higher than 1.8% at the time of the January MPR. The higher inflation in the last couple of months reflects some rebound in goods price inflation and the end of the temporary suspension of the GST/HST. Starting in April, CPI inflation will be pulled down for one year by the removal of the consumer carbon tax. Lower global oil prices will also dampen inflation in the near term. However, we expect tariffs and supply chain disruptions to push up some prices. How much upward pressure this puts on inflation will depend on the evolution of tariffs and how quickly businesses pass on higher costs to consumers. Short-term inflation expectations have moved up, as businesses and consumers anticipate higher costs from trade conflict and supply disruptions. Longer term inflation expectations are little changed. Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well controlled. Governing Council will proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians. Information note The next scheduled date for announcing the overnight rate target is June 4, 2025. The Bank will publish its next MPR on July 30, 2025. Read the April 16th, 2025 Monetary Report

Is There A Difference Between A Deposit And Downpayment

By Darrell McCollom • April 9, 2025
If you’re new to the home buying process, it’s easy to get confused by some of the terms used. The purpose of this article is to clear up any confusion between the deposit and downpayment. What is a deposit? The deposit is the money included with a purchase contract as a sign of good faith when you offer to purchase a property. It’s the “consideration” that helps make up the contract and binds you to the agreement. Typically, you include a certified cheque or a bank draft that your real estate brokerage holds while negotiations are finalized when you offer to purchase a property. If your offer is accepted, your deposit is held in your Realtor’s trust account. If your offer is accepted and you commit to buying the property, your deposit is transferred to the lawyer’s trust account and included in your downpayment. If you aren’t able to reach an agreement, the deposit is refunded to you. However, if you commit to buying the property and don’t complete the transaction, your deposit could be forfeit to the seller. Your deposit goes ahead of the downpayment but makes up part of the downpayment. The amount you put forward as a deposit when negotiating the terms of a purchase contract is arbitrary, meaning there is no predefined or standard amount. Instead, it’s best to discuss this with your real estate professional as your deposit can be a negotiating factor in and of itself. A larger deposit may give you a better chance of having your offer accepted in a competitive situation. It also puts you on the hook for more if something changes down the line and you cannot complete the purchase. What is a downpayment? Your downpayment refers to the initial payment you make when buying a property through mortgage financing. In Canada, the minimum downpayment amount is 5%, as lenders can only lend up to 95% of the property’s value. Securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. You can source your downpayment from your resources, the sale of a property, an RRSP, a gift from a family member, or borrowed funds. Example scenario Let’s say that you are looking to purchase a property worth $400k. You’re planning on making a downpayment of 10% or $40k. When you make the initial offer to buy the property, you put forward $10k as a deposit your real estate brokerage holds in their trust account. If everything checks out with the home inspection and you’re satisfied with financing, you can remove all conditions. Your $10k deposit is transferred to the lawyer’s trust account, where will add the remaining $30k for the downpayment. With your $40k downpayment made, once you sign the mortgage documents and cover the legal and closing costs, the lender will forward the remaining 90% in the form of a mortgage registered to your title, and you have officially purchased the property! If you have any questions about the difference between the deposit and the downpayment or any other mortgage terms, please connect anytime. It would be a pleasure to work with you.