On October 23, 2024, the Bank of Canada cut its target for the overnight rate by 0.50 percentage points to 3.75%, with the Bank Rate at 4% and the deposit rate at 3.75%. All three earlier cuts in the cycle were 0.25 points.
Bank of Canada policy rate, %
What the Bank said
- CPI inflation fell from 2.7% in June to 1.6% in September. Shelter inflation remains elevated but has begun to ease.
- The unemployment rate was 6.5% in September.
- The Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025 and 2.3% in 2026.
- Residential investment is expected to rise as strong demand for housing lifts sales.
- If the economy evolves in line with the forecast, the Bank expects to reduce the rate further.
What it means for Calgary
The policy rate is now 1.25 points below its peak of 5%. Calgary’s September supply of 2.5 months gives buyers more choice than in the spring, and cheaper variable-rate borrowing could bring more of them back this winter. The next decision is on December 11, 2024.
Why a bigger cut this time
“With inflation now back around the 2% target,” the Bank said, Governing Council chose a 50 basis point cut “to support economic growth and keep inflation close to the middle of the 1% to 3% range.” In September, inflation was 2.5% and the Bank was weighing opposing forces. By October, CPI inflation had fallen to 1.6%, core measures were below 2.5%, and inflation expectations of businesses and consumers had largely normalized. The drop in global oil prices, about $10 lower than assumed in July, also lowered gasoline prices.
The economy and jobs
The economy grew at around 2% in the first half of the year, and the Bank expects 1.75% in the second half. Consumption is growing overall but declining per person. Exports have been boosted by the opening of the Trans Mountain Expansion pipeline, which matters for Alberta’s energy sector. The labour market remains soft, with unemployment at 6.5% in September, and the Bank said modest hiring has particularly affected young people and newcomers. Wage growth remains elevated relative to productivity.
Housing in the forecast
The Bank expects residential investment growth to rise “as strong demand for housing lifts sales and spending on renovations.” It also expects the upward pressure from shelter costs to diminish gradually. In Calgary, CREB reported 5,064 homes for sale in September and 2.5 months of supply, so buyers returning because of lower rates will find more choice than in the spring.
What comes next
The Bank said it expects to reduce the rate further if the economy evolves in line with its forecast, but it will take decisions “one meeting at a time.” The policy rate is now 3.75%, compared with 5% in May. For a variable-rate borrower, the four cuts together mean noticeably lower interest costs; for buyers, they mean larger pre-approvals at the same income.
For Calgary buyers, this combination of lower rates and more listings is the best in years for negotiating, especially for condos and higher-priced detached homes. Lock in a pre-approval rate if you plan to buy in the next few months. For sellers, lower rates should bring more buyers back, but competition from other listings means that pricing and presentation still matter. Homeowners renewing in 2025 should start comparing offers early.
The global picture
The Bank expects the global economy to grow about 3% over the next two years. Growth in the United States is now expected to be stronger than previously forecast, while China’s outlook remains subdued and the euro area should recover modestly next year. Inflation in advanced economies has fallen to around central bank targets, and global financial conditions have eased since July.
