March 6: Bank of Canada Holds Interest Rate Steady at 5%

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 Activity: There was a slowdown in global economic growth during the fourth quarter, with the US economy showing resilience through robust consumption and exports. The Euro area’s growth was stagnant after a contraction in the previous quarter.
Inflation Trends: Inflation rates in both the United States and the euro area have shown signs of easing. Meanwhile, Canada witnessed a decline in CPI inflation to 2.9% in January, with a notable moderation in goods price inflation but persistent shelter price inflation.
Canadian Economic Performance: The Canadian economy grew more than expected in the fourth quarter, despite the growth being weak and below potential. Real GDP expanded by 1%, with a significant contribution from exports. However, there was a notable contraction in business investment.
Financial Markets: Since January, there have been increases in bond yields and a narrowing of corporate credit spreads, alongside a sharp rise in equity markets. Global oil prices have slightly increased compared to assumptions made in the January Monetary Policy Report.

In the statement announcing the decision to hold the interest rate steady, the Bank of Canada states, “The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation.”

“Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, 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, April 10, 2024.