Bank of Canada Cuts Rates 0.25% – July 2024
Here’s a point form summary of the post: Interest Rate Cut:Bank of Canada cuts interest rates by 0.25%, lowering Prime Rate from 6.95% to 6.7%, the second consecutive cut. Economic Indicators:Latest inflation and jobs reports are weaker than expected.“Core” inflation measures have been rising on a 3-month annualized basis.Base effects will challenge further declines in inflation. Job Market:Canada needs to add 50k jobs per month to match working-age population growth.Recent job reports show a decline in the number of jobs.Business investment and consumer spending are deteriorating.Unemployment rate rising, indicating recession-like conditions. Population Growth:High population growth (2.1 million new people in 2 years) skews economic data.Economy growing at 1.5% per year, but population growth is double that rate. Forecasts:Big banks forecast further rate cuts:0.25% – 0.5% in cuts for this year.Total of 0.5% – 1.5% cuts by the end of 2025. Next Bank of Canada Meeting:Scheduled for September 4th.No further updates until then; enjoy the summer! |
The Bank of Canada has cut interest rates this morning by 0.25%, lowering Prime Rate from 6.95% to 6.7%. This is the 2nd consecutive cut & very much warranted as the latest inflation & jobs reports came in smellier than expected. While continuing on with consecutive cuts to close out the year would be a welcome reprieve, temper expectations as they expect growth to pick up in the back half of 2024. The Bank of Canada’s preferred measures of “Core” inflation have been inching up higher on a 3 month annualized basis. With inflation coming down from August to Nov of last year, the base effects will prove a headwind to declining inflation: |
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On the jobs front, Canada needs to add 50k jobs per month to keep up with increases to the working age population & the last print wasn’t even close to that as we actually saw a decline in the number of jobs. Business investment & consumer spending continues to deteriorate & what you’re hearing from a lot of businesses is that it “feels” like a recession, for good reason… The unemployment rate is rising like it usually only does during a recession but high population growth is painting a rosier picture than is reality. Canada has added 2.1 million new bodies in just 2 years. The economy is growing at about 1.5% per year with population growth double that, meaning we’re falling behind. |
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So what’s going to happen? Well, don’t hang your hat on any of these but below is what the big banks are forecasting for further rate cuts. The range is anywhere from another 0.25% -0.5% in cuts for this year with a total of 0.5% – 1.5% by end of 2025. |
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The next Bank of Canada meeting is September 4th so that’s it for the summer. Go enjoy the sunshine & we’ll see you in a month & a half! For more updates and insights, follow @zupanmortgages on Instagram for daily content. |