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Bank of Canada Maintains Key Interest Rate and Hints at Possible Future Increase


Sep 6, 2023

The Bank of Canada has decided to keep its benchmark interest rate steady at 5 percent, as expected, due to signs of a slowing Canadian economy. The central bank stated that recent evidence of easing excess demand and the effects of monetary policy led to this decision. However, the bank did not rule out the possibility of further rate hikes, citing broad-based inflationary pressures and little downward momentum in underlying inflation. The Bank of Canada remains concerned about underlying inflationary pressures and is prepared to increase the interest rate if necessary. The bank will continue to assess core inflation dynamics, inflation outlook, wage growth, and corporate pricing behavior in relation to its 2 percent inflation target. During the second quarter, the Canadian economy contracted at an annualized rate of 0.2 percent, which was weaker than anticipated. Additionally, Canada lost a net of 6,400 jobs in July, leading to the third consecutive month of increases in the unemployment rate. The Bank of Canada halted its tightening cycle in March to assess the impact of eight consecutive rate hikes, but resumed increasing rates in June and July due to concerns over returning inflation to the target. While policymakers are hesitant to signal an end to rate hikes, recent weak economic data supports the belief that rates will not be raised further in this cycle.

By Editor

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