The Bank of Canada held its benchmark interest rate steady on Wednesday amid signs that inflation is easing.
The central bank’s policy rate, which informs lending rates on key products like Canadian mortgages, remains at 5.0 per cent for the sixth straight decision.
The hold was widely expected by economists amid signs price pressures are easing, growth in the economy has stalled and the once-tight labour market is softening.
The Bank of Canada’s rate tightening cycle began more than two years ago in an effort to rein in decades-high levels of inflation.
Annual inflation has cooled significantly since then, last coming in at 2.8 per cent in February. The central bank reaffirmed in an updated monetary policy report released on Wednesday that it expects inflation to return to its two per cent target in 2025.
The Bank of Canada’s preferred metrics of core inflation have also begun to ease lately, hovering above three per cent in February.
The central bank acknowledged this progress in its statement accompanying the rate decision on Wednesday, but said it was still looking for evidence that “downward momentum is sustained.”
More on Money
Shelter price inflation also remains “very elevated,” the Bank noted, thanks to rising rents and mortgage costs. Food price inflation is expected to continue to cool thanks to global price declines in the agricultural sector, according to the MPR.
Monetary policymakers will continue to watch the evolution of inflation expectations, corporate pricing behaviour and wage growth as it decides where to take its benchmark interest rate next.
The central bank noted that recent easing in the labour market suggests wage pressures are “moderating.” The Bank’s MPR said it expected further progress in inflation expectations and normalized pricing in the months ahead.
But rising home prices tied to strong demand in the housing market and outstanding geopolitical risks still threaten to push inflation higher in the months ahead, the report warned.
© 2024 Global News, a division of Corus Entertainment Inc.
