ISTANBUL

The Bank of Canada expects around 2.25% economic growth over the next two years, according to its Summary of Governing Council deliberations released Wednesday of its policy decision on July 24.

"After weakness in the second half of 2023, GDP growth resumed in the first quarter of 2024. Recent data suggested positive but subdued GDP growth in the second quarter, largely driven by population growth," it said.

"GDP growth was expected to pick up in the second half of the year and continue expanding by around 2¼% over the next two years. This forecast is largely driven by renewed strength in residential investment and consumption, as well as a boost in exports," it added.

The Bank of Canada announced July 24 that it reduced its policy rate by 25 basis points to 4.5%, marking the second rate cut in more than four years.

The central bank said the unemployment rate had gradually increased to 6.4% in June as the economy slowed, while wage growth remained elevated at around 4%, well above productivity growth.

The Governing Council members noted that consumer price index (CPI) inflation had been within the 1% - 3% range since January, while it came in at 2.7% in June.

"Shelter prices remained the largest contributor to overall inflation. Strong demand for housing and limited supply would continue to put upward pressure on rent," it added.

The bank said the US economy had begun to slow in the first half of the year, largely due to the long-anticipated moderation in consumer spending, and noted that a cooling labor market could further dampen consumption.

"In Europe, growth had come in a bit stronger following a weak 2023. Tourism was providing a boost to activity. Labor costs remained high and may have been contributing to services price inflation in the euro area," it added.