BC of Canada maintains basic interest rate at 4.5% per annum

The Bank of Canada (BoC) decided this Wednesday (8) to maintain its basic interest rate at 4.50%, paralyzing the recent tightening cycle, after raising the rate by 25 on January 25 basis points.

The institution says that it continues with the quantitative tightening (QT, its acronym in English) already in progress. In addition, he points out that he is prepared to raise interest rates further, if necessary for inflation to return to the 2% target.

In a statement, the Canadian BC pointed out that global growth continues to slow down and inflation, falling, mainly due to energy, although the rate remains “very high”. The BC said that economic developments evolved globally in line with the perspectives of the Monetary Policy Report (MPR).

The BC points out that the labor market remains tight, and that the country’s Gross Domestic Product (GDP) is lower than expected, largely due to a considerable slowdown in investment in inventories.

“Restrictive monetary policy continues to weigh on household spending, and business investment has weakened along with slowing domestic and external demand.”

Overall, the central bank says recent data remain in line with expectations that consumer inflation (CPI) will fall to around 3% in 2023.

According to a statement, annual and quarterly inflation rates should fall further, as well as short-term expectations, so that it is possible for inflation to return to the 2% target.

Still according to the communiqué, the forecast is for a “weak” economic growth in the coming quarters, so that a drop in the pressures of the labor market is expected.

“This should moderate wage growth and also increase competitive pressures, making it harder for companies to pass higher costs on to consumers.”