Roger Nambiar

For the second time in as many meetings, the Bank of Canada lowered the target for the overnight rate by 25 basis points, a decision in line with the consensus and market expectations. The rate reduction brings the policy rate to 4.50%, fully unwinding the two rate hikes delivered in June and July 2023. This move also pushes the BoCs policy rate 100 bps below the Federal Reserves (based on the upper bound target), marking the largest negative gap since the late 1990s. Despite the consecutive cuts and upward pressure on CORRA, balance sheet normalization will continue (as expected). Here are additional highlights from the communique and the opening statement to the press conference: Driving the decision to cut was broad price pressures continuing to ease and ongoing excess supply lowering inflationary pressures. Once again, there wasnt really any forward rate guidance in the press release but the opening statement to the presser reiterated that it is reasonable to expect further cuts if inflation eases in line with their forecast. He added that downside risks are taking on increased weight in our monetary policy deliberations. Note that the statement dropped the focus items that theyd previously been referring to (i.e., the balance between demand and supply, inflation expectations, wage growth, and corporate pricing behaviour). Instead, incoming information will guide future decisions. The statement notes that excess supply is growing: With robust population growth of about 3%, the economys potential output is still growing faster than GDP, which means excess supply has increased. On the labour market, they highlight that there are signs of slack with labour force growth outpacing employment and job seekers having more trouble finding work. Wage growth is showing some signs of moderating but remains elevated. As for inflation, the statement notes that broad inflationary pressures are easing although shelter and some services inflation remains elevated. Governing Council is carefully assessing these opposing forces on inflation. https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/boc-policy-monitor.pdf

Artificial Intelligence (AI) has had many breakthroughs in the past few years, and more and more households are beginning to incorporate it in their daily routines. The BMO Real Financial Progress Index reveals a growing number of Canadians, notably Gen Z, are using artificial intelligence (AI) to help manage their finances and investments. Among the 33% of Canadians using AI to help manage their finances, the most common uses include: Learning more about personal finance topics (45%), Creating and/or updating household budgets (43%), Identifying new investment strategies (42%), Building savings (40%), and Creating and/or updating their financial plans (40%). While AI is helping Canadians manage some aspects of finances, over two thirds (68%) say AI cannot understand how emotions influence financial planning. AI is a transformative technology that can instantly analyze information and generate ideas, but peoples relationship with money is complex, personal and emotional. By making it easier to help manage finances, AI is proving a powerful tool to build financial literacy and make informed financial decisions, and together with guidance from a professional advisor, more Canadians can be empowered to conveniently manage their money, achieve their goals and make real financial progress. https://about.bmo.com/artificial-intelligence-has-taken-the-world-by-storm-heres-how-canadians-are-using-it-to-help-with-their-finances/