Bank of Canada Holds Policy Rate at 4.5 Percent, For Now
Bank of Canada will hold its policy rate at 4.5 percent, which is a first after eight consecutive rate hikes since last March. The central bank is confident that inflation will come down in 2023. The next rate announcement from the bank is expected on April 12.
The Bank of Canada has been raising the interest rate to fight inflation since March of last year. Currently, the inflation rate sits at 5.9 percent suggesting that prices for some services, energy, and durable goods have come down. However, inflation in food and shelter cost is still high at 10.4 percent. In the latest interest rate announcement, the central bank has shared it will hold its policy rate at 4.5 percent.
This pause was anticipated back in January to assess how the Canadian economy is recovering. It is the first time in eight months that the interest rate has not gone up.
In a news release, the central bank said, “Overall, the latest data remains in line with the Bank’s expectation that CPI inflation will come down to around 3 percent in the middle of this year.” It is confident that inflation will come down in 2023. Because of the anticipated weak economic growth in the next few quarters, the pressure on the Canadian labor market and wages will ease. “This should moderate wage growth and also increase competitive pressures, making it more difficult for businesses to pass on higher costs to consumers,” the bank explained.
However, if economic circumstances change, the bank could change its overnight rate. With an inflation target of 2 percent, the Bank of Canada will continue to monitor economic developments and is prepared to increase the policy rate again.