'Data For Business' is an effort of the Langley Chamber, in partnership with the Canadian Chamber, to bring our members reports, stats and analysis on economic and business data to help inform business and investment decisions.  Read our latest update below, courtesy of Stephen Tapp, Canadian Chamber's Chief Economist:  

This week, the Bank of Canada held its policy rate at 5% for the sixth consecutive time, a move that was widely expected.  While the Bank has seen encouraging progress in the fight against inflation and Canadian economic growth in recent months, they are still cautious and would like to see more progress before considering rate cuts.

Looing ahead, the Bank's next rate announcement is June 5th, and while many are expecting an interest rate cut, this is far from guaranteed.  Markets are currently pricing in about a 60% chance of a rate cut.  Inflation has been trending down, but the Bank may wish to wait longer to see persistence in that downward momentum before taking action to reduce rates. 

Key Takeaways:

Global Growth

The Bank’s outlook for the global economy was revised up, largely reflecting strength in the United States. The forecast for U.S. real GDP growth in 2024 is now a robust 2.7%, up from 1.7% — taken together with the upward revision to U.S. growth next year and the weakening Canadian dollar, this should help Canadian exports. Growth in Europe remains weak, while China faces ongoing headwinds from its property sector.

Canada's Economy 

The Bank’s forecast for Canadian real GDP was also revised up this year to 1.5% from 0.8%, including a considerable step up for the first quarter. This largely reflects good recent data and faster population growth in 2024 (as weakness in real GDP per capita unfortunately continues). Population growth slows in 2025 due to new limits on non-permanent residents entering Canada.

Inflation

After two months of better-than-expected data, the Bank’s inflation forecast was revised down for this year (to 2.6% from 2.8%). The Bank sees inflation falling below 2.5% in the second half of 2024, and getting close to the 2% target by the end of 2025.

Neutral Rate Change 

The Bank of Canada has updated its "neutral rate" (the interest rate it thinks neither drives up or pushes down inflation) to 2.25% - 3.25%.  This is an increase of 0.25% from their previous 2-3% range, meaning they could feel more comfortable keeping rates slighlty higher over the long-term.