The global economy grew by approximately 3% in the first quarter of 2024, aligning with the Bank’s April Monetary Policy Report (MPR) projection. In the United States, economic expansion was slower than expected due to weaknesses in exports and inventories, though private domestic demand remained robust but slightly eased. The euro area saw increased activity in the first quarter, while China's economy strengthened, driven by exports and industrial production, despite weak domestic demand. Inflation is easing in most advanced economies, although progress towards price stability varies across regions. Oil prices have been close to MPR assumptions, and financial conditions remain largely unchanged since April.

In Canada, economic growth resumed in the first quarter of 2024 after a stall in late 2023. GDP growth was 1.7%, which is lower than the MPR forecast, primarily due to weaker inventory investment. Consumption grew solidly at around 3%, with increases also seen in business investment and housing activity. The labor market shows continued hiring, though employment growth lags behind the working-age population increase. Wage pressures persist but are gradually easing. Overall, data indicates the economy still has excess supply.

CPI inflation further eased to 2.7% in April. The Bank’s core inflation measures also slowed, with three-month indicators suggesting ongoing downward momentum. The breadth of price increases across CPI components has decreased to near historical averages, though shelter price inflation remains high.

Given the continued easing of underlying inflation, the Governing Council decided to reduce the policy interest rate by 25 basis points, no longer seeing the need for such a restrictive monetary policy. Recent data has increased confidence that inflation will continue to move towards the 2% target. However, risks to the inflation outlook persist. The Governing Council is closely monitoring core inflation trends, the balance of supply and demand, inflation expectations, wage growth, and corporate pricing behavior. The Bank remains steadfast in its commitment to restoring price stability for Canadians.

Information Note:

The next scheduled date for announcing the overnight rate target is July 24, 2024. On this date, the Bank will also release its next full outlook for the economy and inflation, including an assessment of risks, in the MPR.