Bank of Canada cuts interest rate to 4.5% in July 2024: Employee rights

What happened?

In a significant move, the Bank of Canada announced today that it has cut its key interest rate by 25 basis points, bringing it down to 4.5%. The Bank Rate is now set at 4.75%, and the deposit rate at 4.5%. This decision is part of the Bank’s ongoing policy of balance sheet normalization. In June, the key interest rate was lowered to 4.75% from 5% in April.

According to the BoC, the global economic landscape is expected to maintain an annual growth rate of about 3% through 2026. Despite persistent inflation rates above targets in many advanced economies, a gradual easing is forecasted.

Notably, the US is experiencing an economic slowdown with moderated consumption growth, while the euro area shows signs of recovery after a weak 2023. China’s economy is growing modestly, driven by strong exports despite weak domestic demand. Global financial conditions have improved with lower bond yields, buoyant equity prices, and robust corporate debt issuance.

Key highlights from the announcement

• Economic Growth: In Canada, economic growth likely increased to about 1.5% in the first half of this year. However, with robust population growth of around 3%, potential output still outpaces GDP, indicating increased excess supply. Household spending, including consumer purchases and housing, remains weak, and the labour market shows signs of slack, with the unemployment rate rising to 6.4%. Employment growth continues to lag behind the expanding labour force, leading to longer job search times. Wage growth, though elevated, shows signs of moderation.
• GDP Forecast: The Bank of Canada forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.4% in 2026. This growth is expected to be driven by stronger exports and a recovery in household spending and business investment as borrowing costs ease. Residential investment is also anticipated to grow robustly. New government limits on admissions of non-permanent residents are expected to slow population growth in 2025.
• Inflation Trends: CPI inflation moderated to 2.7% in June after a rise in May, with broad inflationary pressures easing. The Bank’s preferred measures of core inflation have remained below 3% for several months, aligning price increases across CPI components with historical norms. However, shelter price inflation, driven by high rent and mortgage interest costs, remains a significant contributor to overall inflation. Inflation in services closely tied to wages, such as restaurants and personal care, is also elevated.
• Future Prospects: The Bank expects core inflation to slow to about 2.5% in the second half of 2024 and ease gradually through 2025. CPI inflation is anticipated to drop below core inflation later this year due to base year effects on gasoline prices but may edge up again before stabilizing around the 2% target next year. The Governing Council decided to reduce the policy interest rate further due to broad price pressures easing and ongoing excess supply lowering inflationary pressures. The Bank remains committed to restoring price stability for Canadians, with future monetary policy decisions guided by incoming information and its implications for the inflation outlook.

When is the next announcement?

The Bank of Canada’s next announcement regarding the key interest rate is scheduled for September 4, 2024. The Bank will also publish its next full economic and inflation outlook, including risk assessments, in the Monetary Policy Report on October 23, 2024.

How does this impact employment?

The Bank’s decision to reduce interest rates can influence job stability and growth in Canada. Lower interest rates generally stimulate economic activity, potentially leading to job creation. However, maintaining higher rates might slow down hiring as businesses face increased borrowing costs.

This latest rate cut reflects the Bank’s ongoing efforts to balance economic growth and inflation control, aiming to provide a stable economic environment for Canadians amidst global uncertainties.

Lost your job?

If you find yourself facing job loss, it’s crucial to understand your employment rights.

In Canada, non-unionized employees can get up to 24 months of severance pay when they are fired or laid off from their job. This includes individuals working full-time, part-time, and hourly in Ontario, Alberta, or B.C.

Severance is the compensation a non-unionized worker in Canada receives from their employer when they are fired without cause.

• Fired for cause? It’s very likely that you are still entitled to full severance pay because employees often don’t meet the conditions necessary for this type of dismissal.

Regardless of a company’s grasp on employment law, they are legally required to provide proper compensation following a termination.

This concept applies during challenging economic conditions, downsizing, the closure of a business, or major public health events such as the COVID-19 pandemic.

WATCH: Employment lawyer Lior Samfiru shares five fast facts about termination without cause on an episode of the Employment Law Show.

Talk to an employment lawyer

If you have been fired or let go for any reason, contact the experienced employment law team at Samfiru Tumarkin LLP.

Our employment lawyers have successfully represented tens of thousands of non-unionized individuals in Ontario, Alberta, and B.C., as well as clients across all Canadian provinces (except Quebec) facing insurance claim denials.

In addition to severance package negotiations, we can assist you on a broad range of employment matters, including:

If you are a non-unionized employee who needs help with a workplace issue, contact us or call 1-855-821-5900 to get the advice you need and the compensation you deserve.