Bank of Canada Holds Key Interest Rate Target at 4.5 Percent Owing to Economic Growth, Declining Inflation

Bank of Canada has maintained its key interest rate target at 4.5 percent analyzing the growth and inflation. The Governing Council will continue to assess the economic situation and remain prepared to raise the policy rate further if needed. The bank will also continue its policy of quantitative tightening.

The Bank of Canada has announced it will hold its target for the overnight rate at 4.5 percent, the Bank Rate at 4.75 percent, and the deposit rate at 4.5 percent. It will continue its policy of quantitative tightening. In Canada, even though the demand still outweighs the supply, the economic growth in the first quarter of this year has been higher than initial projections from January.

The bank also shared that the increase in population is contributing to the labor supply and supporting employment growth while also boosting aggregate consumption.

On the other hand, the bank predicts that overall, the GDP growth will be weak through the remainder of this year but strengthen gradually next year. The economy will move into excess supply in the second half of this year and Canada’s economy is expected to grow by 1.4 percent this year and 1.3 percent in 2024 before reaching 2.5 percent in 2025. Recent data also shows that inflation will continue to decline in the next few months.

Because of the growth and reducing global inflation, the Bank of Canada has made its decision to hold the key interest rate. However, it will continue to monitor the economic situation and is prepared to raise the interest rates to combat inflation.

Vineet Washington