The Bank of Canada is widely expected to further lower interest rates by 25-basis points at its next policy meeting scheduled for Sept. 4.
Economists polled by the Reuters news agency overwhelmingly expect Canada’s central bank to lower its benchmark overnight interest rate by a quarter of a percentage point.
A cut on Sept. 4 would mark the third consecutive time since June that the Bank of Canada has lowered interest rates. The central bank’s overnight rate currently stands at 4.50%.
Inflation in Canada is presently at an annualized rate of 2.5%, which is within the Bank of Canada’s 1% to 3% target range and down from a peak of 8.1% reached in June 2022.
At the same time, Canada’s economy continues to show signs of cooling.
Statistics Canada just reported that the economy grew an annualized 2.1% in this year’s second quarter.
While the Q2 GDP growth was above many forecasts, including the Bank of Canada’s own outlook, the data showed that the economy continues to shrink on a per-person basis, indicating an erosion in the country’s standard of living.
The latest GDP data also showed that economic growth in Q2 of this year was driven by government spending rather than broad-based activity or spending in the private sector.
Data showed that Canada’s GDP was flat in both June and July, providing mounting evidence of an economy that is slowing down.
Overall, economic growth across Canada is lagging the country’s strong population growth that’s being fueled by immigration.
A majority of economists expect the Bank of Canada to lower interest rates an additional 75-basis points through the end of this year, bringing the total decline for 2024 to 1.25%.
The central bank has three more meetings scheduled between now and the start of 2025 – on Sept. 4, Oct. 23 and Dec. 11.
