The Bank of Canada has maintained its overnight rate at 5%. This decision comes amidst a backdrop of decelerating global economic growth, with a forecasted GDP growth of 2.9% this year, further dipping to 2.3% in 2024, but recovering slightly in 2025 at 2.6%.
The Bank noted within its global growth outlook the U.S. economy is bucking the trend with better-than-expected performance, whereas China’s economic engine appears to be sputtering. Add to this mix the rising oil prices and ongoing tensions in the Middle East, and the global economic landscape becomes even more complex.
Within Canada, the effects of previous rate hikes are said to be becoming evident as they suppress economic activity, based on the reduced demand for housing and other goods. Predictions for the nation’s GDP growth are modest, standing at 1.2% this year, dropping to 0.9% in 2024, but with aspirations of a bounce back to 2.5% in 2025.
Inflation remains unpredictable, having swung from 2.8% in June to 4.0% in August, then settling at 3.8% in September. The bank specifically highlighted that while food inflation is easing from very high rates, rent and other housing costs remain high, while core inflation shows little downward momentum. Inflation overall is estimated at 3.5% through to the middle of 2024 before easing to 2% in 2025.
The Bank in its closing statement added that it is prepared to raise the policy rate further if needed.
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