Bank of Canada holds interest rate; relief on horizon?

As expected, the Bank of Canada left its overnight rate at 5% — though there were suggestions in today’s announcement that rates could come down eventually.

The bank remains concerned about ongoing high inflation and forecasts core costs to continue increasing by 3% in 2024, before easing to the target rate of 2% in 2025.

Among the metrics the bank is watching are wages, which continue rising around 4% to 5% annually, even as job vacancies are being created at a slower rate than population growth.

“Global economic growth continues to slow, with inflation easing gradually across most economies. While growth in the United States has been stronger than expected, it is anticipated to slow in 2024, with weakening consumer spending and business investment,” the bank said. “In Canada, the economy has stalled since the middle of 2023 and growth will likely remain close to zero through the first quarter of 2024. Consumers have pulled back their spending in response to higher prices and interest rates, and business investment has contracted.”