Toronto 
In its latest announcement, the Bank of Canada has decided to keep its target for the overnight rate at 5%, maintaining the Bank Rate at 5¼% and the deposit rate at 5%. The central bank is also continuing its strategy of quantitative tightening.
The following are the main points of the Bank of Canada’s observations in the rate announcement summary:
- Global Economic Outlook: Global economic growth is decelerating, with inflation gradually easing in most economies. The U.S. shows stronger-than-expected growth but is likely to slow in 2024. The Euro area is experiencing a mild contraction, and China faces low consumer confidence and policy uncertainty. Oil prices have dropped by about $10 per barrel since October.
- Global GDP Forecasts: The Bank projects a global GDP growth of 2½% in 2024 and 2¾% in 2025, following a 3% growth rate in 2023. Inflation in advanced economies is expected to slowly decrease, aligning with central bank targets by 2025.
- Canadian Economic Conditions: Canada’s economy has been stagnant since mid-2023, with growth expected to remain near zero in early 2024. Consumer spending and business investment have declined due to higher prices and interest rates. The labor market shows signs of easing, with job vacancies near pre-pandemic levels and wage growth between 4% to 5%.
- Canadian Economic Growth Projections: The Bank forecasts a gradual strengthening in economic growth from mid-2024, with a 0.8% GDP growth in 2024 and 2.4% in 2025. Household spending, exports, business investment, and government spending are expected to contribute to this growth.
Canada’s CPI inflation ended at 3.4% last year, primarily driven by shelter costs. Bank of Canada expects inflation to hover around 3% in the first half of this year and then gradually ease, reaching the 2% target by 2025.
The Bank is cautious about persistent underlying inflation and is focused on balancing demand and supply, inflation expectations, wage growth, and corporate pricing behaviour.
The Bank of Canada says it remains resolute in its commitment to restoring price stability for Canadians.
The next scheduled date for announcing the overnight rate target is on Wednesday, March 6, 2024.
