tiff macklem : monetary policy decision opening statement by mr tiff macklem, governor of the bank of canada and ms carolyn rogers, senior deputy governor of the bank of canada, at the press conference following the monetary policy decision, ottawa, ontario, 11 december 2024. * * * good morning. i'm pleased to be here with senior deputy governor carolyn rogers to discuss our policy decision. today, we lowered the policy interest rates by 50 basis points. this is our fifth consecutive decrease since june and brings our policy rate to 3¼ %. monetary policy has worked to bring inflation back to the 2 % target. our policy focus now is to keep inflation close to target. let me outline what we're seeing in the economy, and how that played into our decision. in the united states, the economy continues to show broad - based strength and inflation has been holding steady. the us dollar has appreciated against most other currencies, including the canadian dollar. canada's economy grew by 1 % in the third quarter, which was slower than we expected. recent data also suggest growth will be lower than projected in the final quarter of this year. growth in the third quarter was pulled down by business investment, inventories and exports. but consumer spending and housing activity both picked up, as lower interest rates started to boost household spending. canada's job market is still softening. businesses have continued hiring, but the number of people looking for work has been increasing faster than the number of jobs. the unemployment rate rose to 6. 8 % in november. it has been especially hard for young people and newcomers to canada to find work. a number of policy measures have been announced that will affect the outlook for growth and inflation in the months ahead. the most significant of these is reduced immigration targets, which suggest gdp growth next year will be lower than we forecast in october. the effects of lower population growth on the inflation outlook will likely be more muted because reduced immigration dampens both demand and supply in the economy. we'll have more to say on this when we release our next forecast in january. other federal and provincial government policies - including a temporary gst break on some consumer products, one - time payments to individuals, and changes to mortgage rules - will likely affect the dynamics of household spending and inflation in the months ahead. again, we will have more to say on this in january. as always, we will look through effects that are temporary and focus on underlying trends

thinking. yesterday, governing council raised the policy rate to 4¾ %. this was our first rate increase since january. when we paused five months ago, we said we needed time to assess whether our forceful monetary policy tightening — 425 basis points in less than a year — was restrictive enough to return inflation to the 2 % target. put another way, we were looking for an accumulation of evidence that supply and demand were rebalancing, and price pressures were easing, in line with our inflation target. by our meeting in april, we were beginning to see some signs that more tightening might be needed and so we discussed the possibility of increasing the policy rate. at that time, we were concerned about elevated core inflation and the tightness in the labour market — including strong wage growth. we also discussed the possibility that consumer demand could be more robust than expected. the data since april have tipped the balance. the accumulation of evidence — across a range of economic indicators — suggests that excess demand in the canadian economy is more persistent than we thought, and this increases the risk that the decline in inflation could stall. that ’ s why we decided to raise the policy rate. let ’ s start with economic growth, which rebounded in the first quarter of 2023 to 3. 1 %. consumption growth, in particular, was very strong at 5. 8 %, with household spending on both goods and services sharply higher. this surprised us. we had expected growth in demand for services to start to ease off, but canadians continue to catch up on travel, entertainment and restaurant spending. more unexpected was the strength of the rebound in goods spending, particularly the demand for interest - rate - sensitive goods, like furniture and appliances. we also considered evidence that buyers were returning to the housing market, even as supply remained tight, which could further fuel inflationary pressures. we discussed how much the strength in consumption could be explained by strong immigration, ongoing pent - up demand and the continued unwinding of supply chain issues. we determined that while these factors are at play to varying degrees, the bottom line is there appears to be more momentum in demand than we expected. we also talked about the labour market. while there are fewer job vacancies, unemployment remains near a record low. more workers are coming into canada, but they are being hired very quickly, reflecting strong labour demand. on inflation, we discussed april ’ s unexpected tick up to 4. 4 % from 4. 3 % in march. while