The Bank of Canada slashed its overnight rate again yesterday by 25 basis points, which could help give Canada’s struggling GDP a much-needed lift. Lately, Canada's economy has been performing like your friend's amateur stand-up show: kind of tough to watch. Statistics Canada reported in April that Canada’s economic output fell below its long-term trend by 7%, or a loss of around $4,200 per person. But here’s some good news — a new report from the International Monetary Fund predicts Canada will rebound next year, potentially becoming the fastest-growing economy among advanced nations. This optimism is partly because inflation has cooled down, which means prices aren't rising as fast, and the Bank of Canada started cutting rates earlier than most other countries, making it cheaper to borrow money. But remember, those rate cuts happened because Canada’s economy hasn’t been doing so well. There isn’t enough competition between businesses or investment by companies, and our workforce is getting older. Plus, lots of people are under-employed as the labour market softens. Cutting interest rates might give our economy a li’l boost in the short term, but addressing some of these bigger problems that are lagging on growth will take some time.
