The Bank of Canada in its policy rate announcement today elected to maintain interest rates at 5.00%, marking the third consecutive meeting in which they have done so.
The bank last raised rates in its July meeting, when it hiked rates by 25 basis points to a flat 5.00%, following a similar hike in June as well.
In making the decision to maintain rates, the Bank stated that it will continue its policy of quantitative tightening. The decision to maintain rates also follows the continued slowdown of the global economy, and the easing of inflation.
The Bank stated that while the US has seen stronger than expected growth and robust consumer spending, this is likely to weaken in the months ahead as past policy rate decisions make their way through the economy. Growth in the euro area meanwhile is said to have weakened, while oil prices have fallen by $10 per barrel more than had been expected in the Monetary Policy Report released in October. The Bank also commented that the US dollar has weakened against most currencies recently.
Here at home, economic growth is said to have stalled in the second and third quarters of 2023, with real GDP contracting 1.1% in Q3. Higher rates are said to be restraining spending, while business spending has been volatile and consumption growth close to zero. And with an easing labour market, with slow job creation and declining vacancies, the Bank suggests that the economy is no longer in excess demand.
The Council is still said to be concerned about “risks to the outlook for inflation,” and is willing to increase rates further if needed. Specifically, further and sustained easing in core inflation is needed.
The next policy decision is earmarked for January 24.
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