The Bank of Canada maintains the interest rate at 5% for the fifth consecutive meeting

He Bank of Canada (BoC) decided this Wednesday, March 6, to keep its main interest rate unchanged at 5%, as expected. This is the fifth consecutive meeting in which the central bank does not move its rates. The last time there was a move was in July 2023, when it was raised 25 basis points from 4.75% to the current 5%.

Bank of Canada statement

The BoC today maintained its target for the overnight interest rate at 5%, leaving the bank rate at 5.25% and the deposit rate at 5%. The bank continues with its quantitative adjustment policy.

Global economic growth slowed in the fourth quarter. US GDP growth also slowed, but remained surprisingly strong and broad-based, with strong contributions from consumption and exports. Eurozone economic growth remained stable at the end of the year after contracting in the third quarter. Inflation in the United States and the euro area continued to decline. Bond yields have risen since January, while corporate credit spreads have narrowed. Stock markets have risen sharply. Global oil prices are slightly higher than expected in the January Monetary Policy Report (MPR).

In Canada, the economy grew more than expected in the fourth quarter, although the pace remained weak and below its potential. Real GDP expanded 1% after contracting 0.5% in the third quarter. Consumption rose a modest 1% and final domestic demand contracted with a large drop in business investment. A sharp rise in exports boosted growth. Employment continues to grow more slowly than population and there are now some signs that wage pressures may be easing. Overall, the data points to an economy with modest oversupply.

CPI inflation decreased to 2.9% in January, as inflation in goods prices moderated further. House price inflation remains high and is the largest contributor to inflation. Underlying inflationary pressures persist: year-on-year and quarterly measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above average historical. The bank still expects inflation to remain close to 3% during the first half of this year before gradually easing.

The Governing Council decided to maintain the official interest rate at 5% and continue normalizing the bank's balance sheet. The Council remains concerned about risks to the inflation outlook, in particular the persistence of core inflation. The Governing Council wants to see a greater and sustained reduction in underlying inflation and continues to focus on the balance between supply and demand in the economy, inflation expectations, wage growth and the price behavior of companies. The BoC remains resolute in its commitment to restoring price stability for Canadians.