Bank of Canada holds interest rate at 5%, but another hike remains on table

financialpost.com:

The Bank of Canada held the overnight interest rate at five per cent on Oct. 25, continuing its policy of quantitative tightening while recognizing that global bond yields are also working to tamp down demand.

“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 central bank said in a statement.

“In Canada, there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures.”

However, despite clearer signs that monetary policy is moderating spending and relieving price pressures, the central bank said it is concerned that progress toward price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed.

“Governing Council wants to see downward momentum in core inflation, and continues to be focused on the balance between demand and supply in the economy, inflation expectations, wage growth and corporate pricing behaviour,” the statement said.

The Bank of Canada noted that CPI inflation has been volatile in recent months — 2.8 per cent in June, four per cent in August, and 3.8 per cent in September — amid higher interest rates that are moderating price gains in many goods bought with credit, a trend that is spreading to services.

And while food inflation is easing from very high rates, elevated mortgage interest costs and inflation in rent and other housing costs remains high.

“Near-term inflation expectations and corporate pricing behaviour are normalizing only gradually,” the central bank said, while wages are still growing between four and five per cent.

“The bank’s preferred measures of core