The Bank of Canada has left its overnight target rate unchanged at 5.00%, as was widely expected by markets. The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.
In its statement, the Bank said it sees “clearer signs that monetary policy is moderating spending and relieving price pressures.”However, the Bank also said it remains concerned by the slow progress towards price stability and notes inflationary risks have increased, reiterating that it is “prepared to raise the policy rate further if needed.”
The global economy is slowing and growth is forecast to moderate further as past increases in policy rates and the recent surge in global bond yields weigh on demand. The Bank projects global GDP growth of 2.9% this year, 2.3% in 2024 and 2.6% in 2025. Inflation has been easing in most economies, as supply bottlenecks resolve and weaker demand relieves price pressures. However, with underlying inflation persisting, central banks continue to be vigilant. Oil prices are higher than was assumed in July.
After averaging 1% over the past year, economic growth is expected to continue to be weak for the next year before increasing in late 2024 and through 2025. The near-term weakness in growth reflects both the broadening impact of past increases in interest rates and slower foreign demand. The subsequent pickup is driven by household spending as well as stronger exports and business investment in response to improving foreign demand. Spending by governments contributes materially to growth over the forecast horizon. Overall, the Bank expects the Canadian economy to grow by 1.2% this year, 0.9% in 2024 and 2.5% in 2025.
The next rate announcement is scheduled for Wednesday, December 6.
(Sources:MPC, Bank of Canada)