Bank of Canada holds interest rate at five per cent

Canada’s central bank is holding its key interest rate at five per cent.

The Bank of Canada made the announcement Wednesday, saying the global economy is slowing, and growth is expected to moderate even further.

“With clearer signs that monetary policy is moderating spending and relieving price pressures, Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet,” the bank wrote in a news release.

“In Canada, there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures.”

The central bank said it expects Canada’s real GDP to grow by 1.2 per cent this year, and just 0.9 per cent in 2024, before increasing to 2.5 per cent in 2025.

The bank is still expecting inflation to reach its two-per-cent target by 2025.

But while the bank’s interest rate was held steady as spending moderates, it did leave open the door for future hikes.

“Governing Council is concerned that progress towards price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed,” the bank’s statement noted.

The bank said it’s looking for “downward momentum in core inflation” while focusing on a balance between economic supply and demand, inflation expectations, wage growth, and corporate pricing.

“The Bank remains resolute in its commitment to restoring price stability for Canadians,” the bank’s statement noted.

The next scheduled announcement on the overnight rate target is set for Dec. 6. The bank’s full outlook for inflation and Canada’s economy is expected on Jan. 24.

— With files from The Canadian Press