Toronto/CMEDIA: Canada’s inflation outlook leads the Bank of Canada to hold its policy rate at 5 percent on Wednesday, The bank said in a note on its website.
The Bank of Canada has held its rate at 5 percent since last July and has held it at 5 percent on five occasions since.
“It’s still too early to consider lowering the policy interest rate. Looking ahead, we continue to expect inflation will be close to 3 per cent through the middle of the year before easing in the second half,” Bank of Canada Governor Tiff Macklem was reported saying during his opening remarks and added,
“The assessment of the governing council is that we need to give higher interest rates more time to do their work,” said Macklem.
Inflation in January being 2.9 percent, still above the bank’s 2 percent target. core inflation reportedly remains in the 3- to 3.5-per-cent range, higher rates need more time to do their work, said the central bank,
Macklem and senior deputy governor Carolyn Rogers held a news conference further explaining the rate decision.
It expects inflation to stay close to three per cent during the first half of this year before it slowly eases.
“We want to give Canadians as much information as we have, but we also don’t want to give a false sense of precision,” Macklem reported saying during the Q&A period and added,
“It would be great if this worked faster…was less painful. But unfortunately, monetary policy…it takes time for that to impact households,” said Macklem
In spite of the economic growth during the last three months of the year driven by global factors, including strong U.S. spending trends which boosted Canadian exports, on a per-capita basis, real GDP continued to fall in the fourth quarter.
“This is probably the weakest one-per-cent growth I think any of us have lived through,” Douglas Porter, BMO’s chief economist was reported saying.
“Recent inflation data suggest monetary policy is working largely as expected,” said Macklem. “But future progress on inflation is expected to be gradual and uneven, and upside risks to inflation remain.”
Macklem pointed out that the key factors in driving inflation volatility. were gasoline prices and shelter price pressures.
The next scheduled rate is set to be announced on April 10.
The Bank of Canada’s first hike in interest rates was in March 2022, the beginning of an aggressive campaign to cool inflation that resulted in 10 rate hikes in less than two years.
