Bank of Canada trims 2024 growth forecast, sees inflation hitting target in 2nd half of 2025

OTTAWA, July 24 (Reuters) - The Bank of Canada on Wednesday trimmed its growth forecast for 2024, citing lower consumption, and reiterated that it expected inflation to return sustainably to its 2% target in the second half of 2025.

In its quarterly monetary policy report, the central bank said 2024 growth would be 1.2%, down from the 1.5% it forecast in April.

The bank said consumption had dipped on the back of slowing demand for motor vehicles and foreign travel as well as the fact households were allocating a larger share of their income to servicing debt payments.

It estimated that on an annualised basis the economy had expanded by 1.7% in the first quarter, well below the 2.8% it predicted in April.

The bank said overall inflation would dip below core inflation in the second half of 2024, in part due to base-year effects on gasoline prices. By the first half of next year this effect will have faded and inflation will settle sustainably at 2% in the second half of 2025.

The bank cut its key policy rate by 25 basis points to 4.50% on Wednesday, the second consecutive reduction.

(Reporting by David Ljunggren, editing by Promit Mukherjee)

((Reuters Ottawa bureau, david.ljunggren@tr.com))

Keywords: CANADA CENBANK/FORECASTS