Everything You Need to Know on Thursday: Bank of Canada Governors Were in Agreement on June Cut, Deliberations Show

Good morning mooers! Here are things you need to know about today's market:

● S&P/TSX 60 Index Standard Futures are trading at 1,287.90, up 0.3%

● Bank of Canada governors were in agreement on June cut, deliberations show

● Canada needs AI adoption to narrow productivity gap, RBC says

● Crude oil prices little changed but under pressure from signs of weak demand, ANZ bank says

Today, the Canadian dollar is trading at 72.92 cents US, a slight decrease from Wednesday.

S&P/TSX 60 Index Standard Futures are trading at 1,287.90, up 0.3% from previous close.

After four consecutive months of easing core inflation and indications of further downward momentum in prices, members of the Bank of Canada‘s governing council agreed the time had come to cut rates in June, setting a new direction for monetary policy, a summary of their deliberations released Wednesday revealed.

The council had been divided on the timing of rate cuts prior to its previous interest rate announcement in April, but on June 5 the central bank cut its key overnight interest rate by 25 basis points to 4.75 per cent.

Though members of council did discuss whether to hold off on a cut until July in order to see additional inflation data, the trend in core inflation, which has remained below three per cent, provided enough confidence to go ahead with the June cut.

“Governing Council discussed how the accumulated evidence improved their confidence that progress toward the two per cent target would be sustained,” the bank’s statement read. “Members agreed that with further evidence showing that underlying inflation is easing and on a more sustained trajectory toward two per cent, monetary policy no longer needed to be as restrictive and a reduction in the policy rate was appropriate.”

Canada’s economic productivity is lagging behind the U.S. and more industries should embrace generative artificial intelligence to catch up, according to a report from Royal Bank of Canada.

Generative AI has the potential to boost Canada’s economy by $180 billion per year by 2030, but 73 per cent of Canadian businesses haven’t even considered using it yet, the report said, citing a Statistics Canada survey from earlier this year.

Some of the country’s major industries, including natural resources, haven’t been significant early adopters of AI tools, according to the research. Meanwhile, costs are a barrier small businesses, which make up the vast majority of Canadian companies: 98 per cent have fewer than 100 employees.

Productivity in Canada — production per hour worked — is 30 per cent lower than in the U.S., partly because of the public-sector-dominated health care and education industries, RBC said. Only a sliver of government operations have adopted generative AI, despite Canada’s strong presence in artificial intelligence research.

“Unfortunately, Canada has simply been better at generating ideas and developing models than putting them to work,” the report said. “Canada’s three National AI Institutes are recognized as world-leading, and some of the great minds in machine learning call Canada home.”

Crude oil prices were little changed after recently released economic data signaled weak demand, ANZ Bank said in a Thursday note.

Brent crude inched 0.1% higher to US$85.17 per barrel and West Texas Intermediate crude lost 0.3% to US$81.32/b at last look early Thursday. Demand in China also weighed on sentiment, the bank noted.

Brent crude hovered slightly below seven-week highs as the market weighed geopolitical developments in the Middle East, Reuters said in a Thursday report.

"Markets anticipate an escalation in the Gaza crisis to dent the oil supplies from the key producing region," Reuters quoted Priyanka Sachdeva, senior market analyst at Phillip Nova, as saying in the report.