Bank of Canada Holds Interest Rate Steady at 5%

The Bank of Canada announced today that it will maintain its main interest rate at the current level of 5%. The decision comes as the central bank aims to manage borrowing costs and bring supply and demand closer to equilibrium.

In its statement, the Bank of Canada highlighted the sluggish progress towards achieving its 2% inflation target. Core prices, which exclude volatile items like food and energy, have shown little downward momentum thus far. To address this concern, the central bank restated its commitment to raising rates if necessary.

Economists surveyed by The Wall Street Journal unanimously predicted no change in the Bank of Canada’s target for the overnight rate. Some analysts had expressed concerns about Canada potentially entering a recession.

The central bank acknowledged that previous rate hikes have had a dampening effect on economic activity while alleviating price pressures. As a result, it downgraded its growth expectations, projecting a 1.2% expansion for this year compared to the previous forecast of 1.8%. Looking ahead, further deceleration is anticipated in 2024, with growth forecasted at 0.9%.

According to the Bank of Canada, there is now “growing evidence that supply and demand in the economy are now approaching balance.” This statement suggests a positive trend in the economy.