The Bank of Canada is holding its key interest rate steady for the first time in a year, sticking to its wait-and-see approach even as its U.S. counterpart charts a more aggressive path.
The central bank said Wednesday that it has decided to hold its key rate at 4.5 per cent based on its assessment of recent economic data.
“Governing council will continue to assess economic developments and the impact of past interest rate increases, and is prepared to increase the policy rate further if needed to return to the two per cent inflation target,” the Bank of Canada said.
The central bank rapidly raised its key interest rate over the last year, bringing it from near-zero to the highest level since 2007.
In January, the Bank of Canada announced an eighth consecutive rate hike and said it expects to maintain its key interest rate if economic developments stay broadly in line with its forecasts.
Economists were widely expecting the Bank of Canada to hold its key interest rate Wednesday, noting it would be too soon to raise rates again. The economy has also generally moved in the right direction for the central bank, which is aiming to slow economic activity.
“There really were no significant surprises here,” said Douglas Porter, BMO’s chief economist.
The Bank of Canada’s policy is starting to diverge from the U.S. Federal Reserve, which signalled recently it plans to continue raising interest rates.
U.S. monetary policy does have implications for Canada, said Stephen Gordon, an economics professor at Laval University. Higher interest rates in the U.S. could attract investment there, weakening the Canadian dollar and raising prices of imports for Canada.
But Gordon cautioned “it’s not an automatic thing of, the (Bank of Canada) has to follow the Fed.”
Recent data showed inflation in Canada slowed to 5.9 per cent in January while the economy posted no growth in the fourth quarter.
The central bank noted “the labour market remains very tight,” but said it expects it to ease and for wage growth to moderate.
Porter said the February labour force survey coming out Friday will give more clarity on whether the 150,000 jobs added in January represented a fluke or underlying strength in the labour market.
The Bank of Canada still expects the country’s annual inflation rate to fall to around three per cent by mid-year.
Gordon said it would take a “surprise” for the Bank of Canada to jump back in and raise interest rates further.
Barring any unforeseen events, inflation in Canada is expected to continue to slow this year because of base year effects.
A base-year effect refers to the impact of price movements from a year ago on the calculation of the year-over-year inflation rate.
Given much of the acceleration in price growth happened in the first half of 2022 as the threat of Russia invading Ukraine turned into a reality, annual inflation rate is expected to continue to slow in the coming months.
“Right now, we can expect inflation to keep tracking down,” Gordon said.
Interest rate hikes can also take up to two years to be fully felt in the economy, meaning more time is needed for the economy to react to previous hikes.
Globally, the Bank of Canada says economic developments have evolved broadly in line with its forecasts. However, it said the strength in China’s economic recovery and the impact of Russia’s war in Ukraine are still “upside risks” that could push up inflation.
Looking ahead, Porter said there are “limits” to how much the Bank of Canada can diverge from the Federal Reserve. He also noted the economies are linked and experience similar pressures, meaning if one country needs higher interest rates, the other likely does too.
“If the U.S. economy is really showing more underlying strength and greater inflation pressures, those will probably get eventually reflected in Canada as well,” he said.
The Bank of Canada will make its next interest rate decision on April 12, accompanied by updated forecasts in its quarterly monetary policy report.
This report by The Canadian Press was first published March 8, 2023.
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MONTREAL – Quebec’s ombudsperson is warning that public services are becoming “dehumanized” in the province amid a rise in demand for them.
Marc-André Dowd released his annual report today, which highlights several examples of people receiving inadequate care across the health network in the 12 months leading to March 31.
One dying man who lived alone was denied help cleaning his cat’s litter box by his local health clinic, a service Dowd says should have been given for “humanitarian reasons.”
Dowd also describes staff at a long-term care home feeding residents “mechanically” and talking among each other — despite health ministry guidelines directing staff to maintain eye contact with residents.
The ombudsperson says his office received a record number of problems to investigate across the province’s public services — 24,867 compared with 22,053 last year.
He says his office investigated 13,358 cases between April 2023 and March of this year.
This report by The Canadian Press was first published Sept. 19, 2024.
OTTAWA – French President Emmanuel Macron will visit Canada next week after a planned trip in July was cancelled amid political turmoil in France.
Prime Minister Justin Trudeau announced in a statement today that Macron will be in Canada Wednesday and Thursday after the leaders attend the United Nations General Assembly in New York City.
Trudeau will welcome Macron in Ottawa on Wednesday, where they are expected to discuss collaboration on geopolitical issues including their ongoing support for Ukraine.
They are also expected to discuss ways to strengthen the response to emerging threats, such as disinformation.
In Montreal, Trudeau intends to show off the city’s artificial intelligence sector, while both countries reaffirm their commitment to work with counterparts on responsible use of AI.
The leaders will also discuss promoting the French language ahead of the Francophonie summit being held in France next month.
This report by The Canadian Press was first published Sept. 19, 2024.
Health Canada has authorized Novavax’s updated COVID-19 vaccine that protects against currently circulating variants of the virus.
The protein-based vaccine, called Nuvaxovid, has been reformulated to target the JN.1 subvariant of Omicron.
It will replace the previous version of the vaccine, which targeted the XBB.1.5 subvariant of Omicron.
Health Canada recently asked provinces and territories to get rid of their older COVID-19 vaccines to ensure the most current vaccine will be used during this fall’s respiratory virus season.
Earlier this week, Health Canada approved Moderna’s updated mRNA COVID vaccine.
It is still reviewing Pfizer’s updated mRNA vaccine, with a decision expected soon.
This report by The Canadian Press was first published Sept. 19, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
Note to readers: This is a corrected story. A previous version erroneously described the Novavax vaccine as an mRNA shot.
