The Bank of Canada lowered its benchmark interest rate by 25 basis points on July 24th, marking the second consecutive cut in the central bank’s easing cycle. The policy rate, which significantly influences borrowing costs across Canada, is now set at 4.5%. Economists widely expected the bank's decision, given the easing of broad price pressures and the recent drop in inflation last June. This decline marked the sixth straight month of inflation within the bank’s target range. The headline yearly rate eased to 2.7%, a level not seen since 2021, indicating a significant moderation in price pressures. The deceleration was largely driven by slower year-over-year growth in gasoline prices.
The Bank expects inflation to reach its 2% target by the second half of 2025, although the path forward may be uneven and subject to fluctuations.
Following the Bank of Canada’s first rate cut last June, home sales in Canada showed early signs of momentum. The Canadian Real Estate Association (CREA) reported a 3.7% month-over-month rise in national home sales for June.
Canada's home price index rose 0.1% in June, the first increase in 11 months. Some areas like Calgary and Ontario cottage country are seeing growth, but prices are still lower than last year's peak. As interest rates continue to fall, the housing market is expected to pick up gradually over the next year.
The Bank of Canada will monitor inflation measures closely before meeting again for the next interest rate announcement on September 4th. Stay tuned for more updates!
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