The Bank of Canada held its policy rate at 5 per cent on Wednesday, citing continued concerns about the inflation outlook. The bank has held its rate at 5 per cent since last July.
“It’s still too early to consider lowering the policy interest rate,” said Bank of Canada Governor Tiff Macklem, during his opening remarks. “Looking ahead, we continue to expect inflation will be close to 3 per cent through the middle of the year before easing in the second half.”
In January, inflation was 2.9 per cent, still above the bank’s 2 per cent target. Core inflation remains in the 3- to 3.5-per-cent range. The central bank says higher rates need more time to do their work.
“Recent inflation data suggest monetary policy is working largely as expected,” said Macklem. “But future progress on inflation is expected to be gradual and uneven, and upside risks to inflation remain.”
The Canadian economy remained weak in the fourth quarter of 2023, with annual GDP growing by 1 per cent. Employment is growing at a slower rate than the population, which has brought the labour market into better balance.
“Job vacancies have returned to more normal levels, and the pace of hiring has been modest,” Macklem said.
Macklem pointed to gasoline prices and shelter price pressures as key factors in driving inflation volatility.
The next scheduled rate announcement is on April 10.
This is a developing news story. Check back for more information.