Bank of Canada holds key interest rate steady in final decision of 2023
The Bank of Canada left its benchmark interest rate unchanged at 5.0 per cent for the third consecutive decision.
The central bank continued to warn Wednesday however that its policy rate may need to rise again if inflation doesn’t continue to ease.
In a statement announcing the hold, the Bank of Canada said signs of “moderating spending and relieving price pressures” allowed it to keep its policy rate unchanged. Inflation’s decline is “broadening,” the statement noted, and the labour market “continues to ease.”
Overall inflation cooled sharply to 3.1 per cent in October, down from a peak of 8.1. per cent in June 2022.
But the central bank’s governing council warned that it’s looking for more signs of easing in its preferred core inflation metrics and is continuing to look at wage growth, inflation expectations and consumer price behaviour in gauging where the benchmark rate should head next.
“Governing council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed,” the statement read.
Wednesday’s move was widely expected by economists and market watchers, who pointed to slowing in Canada’s economy and easing in the annual inflation rate as signs the central bank’s rate hike cycle might have peaked.
The Bank of Canada has raised its policy rate 4.75 percentage points since March 2022 in an effort to tame decades-high inflation.
The central bank raises the cost of borrowing in an effort to slow economic growth, discourage spending and rein in demand, while also making loans like mortgages more expensive for Canadians.
The Bank of Canada on Wednesday noted rising pressures on the shelter component of the consumer price index, even as overall inflation
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