Bank of Canada’s Wednesday lowering of its policy interest rate to 4.75 per cent from 5 per cent a welcome first move
Governor of the Bank of Canada Tiff Macklem speaks following the Bank of Canada ’s release of the 2024 Financial Stability Report in Ottawa on May 9.Craig Alexander is a contributing columnist for The Globe and Mail. He has served as chief economist at Deloitte Canada , the Conference Board of Canada and Toronto-Dominion Bank .on Wednesday is welcome news.
Some slack in the economy has developed because of the sub-par pace of economic growth in 2023 and the rapid pace of population growth that temporarily lifted the non-inflationary rate of expansion in the economy to around 2.5 per cent in 2024. But, given the government’s efforts to reduce the inflow of non-permanent immigrants, the Bank of Canada estimates that the sustainable rate of growth in the economy will fall to 1.7 per cent in 2025.
The Bank of Canada also must be mindful that inflation risks remain elevated because of structural changes in the global economy. Globalization is no longer having the disinflationary impact of the past. Firms are shifting their supply chains to build greater resilience, but this is adding to costs that will be passed along to consumers.
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