The central bank of Canada announced Wednesday that it would maintain its key rate at 5%, saying it was “concerned about the risks surrounding the inflation outlook, especially the persistence of high underlying inflation.”
The Bank remains committed to restoring price stability for the Canadian population, added the institution. The key rate has been its highest level in 22 years since July.
The institution also announced that it would continue its policy of quantitative tightening.
The Bank of Canada had warned in recent months that further rate hikes were possible, due to its concerns about the inflation outlook.
The latter stood at 3.4% in December (over one year), a slight increase, after reaching a peak of 8.1% in June 2022.
The central bank has maintained its key rate at 5% for several months, after around ten increases, in an attempt to bring Canadian inflation back to around 2%.
With Canadian gross domestic product (GDP) declining in the third quarter of 2023 by 1.1% at an annualized rate, the economy has stagnated since mid-2023, and growth will likely remain close to zero in the first quarter of 2024, estimates the Canadian central bank on Wednesday.
It also revised its annual forecasts slightly downward, now expecting GDP growth of 0.8% in 2024 and 2.4% in 2025, compared to 0.9% and 2.5% in its October estimates. .
The Bank of Canada no longer considers the economy to be overheating, commented Royce Mendes, analyst for Desjardins Bank, in a note. We continue to believe that the rate cuts will begin in April, he added.
Today’s announcement was expected, said Avery Shenfeld, analyst at CIBC Economics. The Canadian central bank is not yet ready, willing or able to cut interest rates, but it has hinted at the possibility of an interest rate cut later this year, he said. he emphasizes.
The last increase in the Canadian key rate dates back to July and the next decision will be taken in March.