The Bank of Canada has reduced its target for the overnight rate to 3¾ percent, with the Bank Rate at four percent and the deposit rate at 3¾ percent. The Bank is continuing its policy of balance sheet normalization.The Bank continues to expect the global economy to expand at a rate of about 3 percent over the next two years. Growth in the United States is now expected to be stronger than previously forecast while the outlook for China remains subdued. Growth in the euro area has been soft but should recover modestly next year. Inflation in advanced economies has declined in recent months and is now around central bank targets. Global financial conditions have eased since July, in part because of market expectations of lower policy interest rates. Global oil prices are about $10 lower than assumed in the July Monetary Policy Report.In Canada, the economy grew at around two percent in the first half of the year and we expect growth of 1¾ percent in the second half. Consumption has continued to grow but is declining on a per-person basis. Exports have been boosted by the opening of the Trans Mountain Expansion pipeline. The labour market remains soft—the unemployment rate was at 6.5 percent in September. Population growth has continued to expand the labour force while hiring has been modest. This has particularly affected young people and newcomers to Canada. Wage growth remains elevated relative to productivity growth. Overall, the economy continues to be in excess supply. (ICE TORONTO)

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