The Bank of Canada has held its key interest rate at five per cent again, saying that it’s still too soon to consider rate cuts.
Economists were widely expecting the central bank to hold the rate. The bank said in a note on its website that it was still concerned about underlying inflation.
It expects inflation to stay close to three per cent during the first half of this year before it slowly eases.
Bank of Canada governor Tiff Macklem and senior deputy governor Carolyn Rogers are holding a news conference further explaining the rate decision at 10:30 a.m. ET.
WATCH | Tiff Macklem, Carolyn Rogers take questions from reporters:
Bank of Canada governor Tiff Macklem speaks during a March 6 press conference explaining the central bank’s decision to hold its key interest rate at 5 per cent.
Macklem said that there have been “no big surprises” since the Bank last held an interest rate announcement in January.
While the Canadian economy has staved off a recession, 2023 was one of its weakest recent years for growth. GDP increased by an annualized rate of one per cent in January. Meanwhile, inflation came down to 2.9 per cent in January as price growth slowed.
“The assessment of the governing council is that we need to give higher interest rates more time to do their work,” said Macklem.
Macklem reiterated on Wednesday that, in January, the bank couldn’t rule out the need to raise rates should inflation unexpectedly rise, but that discussions had shifted from whether policy was restrictive enough to how long it would have to stay at its current level.
It’s still too early to consider lowering the rate, he said. Future progress on inflation is expected to be gradual and uneven.
WATCH | Inflation has eased. Why isn’t the bank cutting interest rates?
After two years of aggressive interest rate hikes, inflation is seemingly back under control, causing many Canadians to start asking: Where’s the relief? CBC’s Peter Armstrong looks at whether the Bank of Canada has accomplished its goals and what we know about when rates could start to come back down.
The central bank last raised the key interest rate in July and has held it at 5 per cent on five occasions since.
The bank first raised interest rates in March 2022, the beginning of an aggressive campaign to cool inflation that resulted in 10 rate hikes in less than two years.
More to come.
