Canada’s central bank kept its main interest rate at 4.5% on Wednesday, marking a pause after eight consecutive increases in less than a year in an attempt to counter inflation.
Given the weak growth expected in the coming quarters, the institution believes that the pressures on the markets should ease and in the long term continue to bring down inflation, but it remains ready to raise its rate if necessary.
The current rate is the highest recorded since 2007.
Despite a tight labor market, the Bank of Canada argues in a statement that its restrictive monetary policy continues to weigh on household spending and slows domestic and foreign demand, suggesting a slowdown in inflation over the long term.
In particular, it expects inflation to fall to around 3% by the middle of the year, still above its target of 2%.
In early February, Bank of Canada Governor Tiff Macklem felt that monetary policy was working and that the institution was taking a turn in its fight against inflation.
January’s latest quarter-point increase was the smallest since March, when the central bank had been steadily raising its rate since January 2022. That month, it was pegged at 0.25 %.
The Canadian central bank also notes that the prospects for short-term growth and inflation in the United States and Europe have been relatively higher recently.
In Washington, the chairman of the Fed hinted Tuesday that the main rate of the institution could rise at a faster rate and a higher level than envisaged until now, in order to fight against persistent inflation in countries.