On October 23, the Bank of Canada announced that it had lowered its policy interest rate by 0.5% to 3.75%. Governor Tiff McCarthy announced in a statement that “We have made this larger decision as inflation has returned to our target of 2%. We will continue to maintain the rate within our target.”
Statistics Canada announced on October 15 that inflation in September was 1.6% compared to the same month last year, slowing further from 2% in August. This was driven by a 10.7% drop in gasoline prices. Excluding gasoline prices, inflation in September was 2.2%.
By comparison, food prices rose 2.4%. The central bank explained the reasons for the cut, saying, “Inflation has fallen significantly in recent months, from 2.7% in June to 1.6% in September. Recent indicators suggest that inflation is expected to be around 2% in October, with upward price pressures no longer broad-based and core inflation now below 2.5%.
Surveys also show that business and consumer inflation expectations have fallen and are closer to normal, all of which suggests a return to low inflation.” The central bank raised the policy interest rate to 5% in July 2023, then cut it by 0.25% in June 2024, making it four consecutive cuts – by 0.25% in July of the same year, by 0.25% in September, and again this month.
Looking ahead, the Fed said, “The timing and pace of further rate cuts will depend on future information and our assessment of their impact on the inflation outlook. We will take one monetary policy decision at a time.” The next report is due to be released on December 11th. By then, the Statistics Bureau will be releasing August GDP, October inflation, and October employment statistics.