Canada’s cooling economy leads Bank of Canada to hold interest rate steady at 5 percent

Bank of Canada. Image credit: Wikimedia Commons

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With Canada’s economy reportedly showing more and more signs of cooling, the Bank of Canada opted to hold its benchmark interest rate steady at five percent.

The central bank’s unprecedented rate hikes since early 2022 bringing down inflation led economists and other financial observers to expect Bank of Canada’s recent move, 

Since the impact of rate moves can often reportedly take up to 18 months to be fully felt, the financial indicators in recent weeks suggested that slowing the economy may be on the table.

According to the Jobs data for July released at the start of August, Canada’s job market lost about 6,000 workers during the month pushing up the unemployment rate to 5.5 percent. 

Canada’s economy contracted in the second quarter of 2023 revealed by Statistics Canada’s released GDP data later in the month.

In its attempt to get inflation back to its two percent target, the central bank welcomed the economic slowdown.

On the other hand, Bank of Canada reported saying that it is ready to further hike rates if necessary.

 In a statement accompanying its decision, it said it “remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed.”