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Bank of Canada cuts rates for first time in four years
The Bank of Canada reduced its key interest rate by 25 basis points to 4.75% in June 2024, marking an end to 11 months of peak rates. The decision follows lower-than-expected GDP growth and signs of easing inflation.
The Bank of Canada cut its key interest rate by 25 basis points to 4.75%.
US private businesses added 152,000 jobs in May 2024, below forecasts.
RBA Governor Michele Bullock emphasized the need to control inflation.
Bank of Canada cuts interest rate by 25bps
The Bank of Canada lowered its key interest rate by 25 basis points to 4.75% in its June 2024 meeting, aligning with market expectations. This move ends an 11-month stretch of peak interest rates in the tightening cycle. The central bank cited recent data indicating increased confidence in continued disinflation towards the target, justifying a less restrictive policy stance. Both of the Bank’s preferred measures of underlying inflation fell below the 3% threshold in the second quarter and are projected to keep declining, with CPI inflation expected to follow. Additionally, Canada's first-quarter GDP growth lagged behind the Bank of Canada's expectations, further supporting the decision to cut rates.
US private sector employment falls short of forecasts
Private businesses in the US added 152,000 workers to their payrolls in May 2024, the smallest increase in four months and significantly below the forecast of 175,000 and April’s downwardly revised figure of 188,000. The ADP report also revealed that annual pay gains for job-changers fell for the second consecutive month.
RBA’s Bullock outlines inflation control plans
Reserve Bank of Australia Governor Michele Bullock addressed a senate panel, stressing the critical need to control inflation despite balanced risks. She emphasized the importance of bringing inflation back to the target range and warned that the RBA would act if inflation trends do not improve.
Bullock explained the RBA’s rate-setting approach, describing a data-driven "Plan A" that keeps all options open without premature commitments. She also outlined two contingency plans: one for persistently high inflation and another for a significant economic downturn.
"If inflation starts to rise again or remains stubbornly high, we will not hesitate to increase interest rates," Bullock asserted. Conversely, she mentioned that a weaker-than-expected economy would prompt considerations for easing rates to combat deflationary pressures.
Meanwhile, Australia’s GDP grew by 0.1% quarter-on-quarter in Q1, missing the anticipated 0.2% growth. Year-over-year, GDP increased by 1.1%.
