The Bank of Canada (BoC) has revised its economic growth forecast for 2024 downwards, citing lower consumption levels, and reaffirmed its expectation that inflation will return sustainably to the 2% target in the second half of 2025.
In its quarterly monetary policy report, the BoC forecast 2024 growth at 1.2%, down from the 1.5% forecast in April. The central bank attributed the decline in consumption to declining demand for motor vehicles and travel abroad, as well as households allocating a larger share of their income to paying off debt.
The BoC estimated that the economy had grown at an annual rate of 1.7% in the first quarter, well below the 2.8% forecast in April.
The central bank also noted that headline inflation is expected to fall below core inflation in the second half of 2024, partly due to base-year effects on petrol prices. By the first half of next year, this effect will fade, and inflation is expected to stabilize sustainably at 2% in the second half of 2025.
In a move to support the economy, the BoC cut its key policy rate by 25 basis points to 4.50% on Wednesday, marking its second consecutive rate cut.
