Bank of Canada Holds Overnight Rate at 5%

Zoltan PadarMortgage, News0 Comments

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This morning, the Bank of Canada announced that it will maintain its overnight rate at 5 per cent.

In their statement, the Bank acknowledged that the Canadian economy seems to be experiencing excess supply, with economic growth stalling in the latter part of last year. However, they anticipate a rebound in growth over the coming year. The Bank’s forecast indicates GDP growth of 1.5 per cent in 2024, 2.2 per cent in 2025, and 1.9 per cent in 2026.

Regarding inflation, the Bank noted a recent easing in both CPI and core inflation, with CPI at 2.8 per cent in February. However, shelter inflation remains notably high, primarily due to increases in rent and mortgage interest costs. The Bank will closely monitor these trends for sustained downward momentum. They expect CPI inflation to dip below 2.5 per cent in the latter half of this year and hit the 2 per cent inflation target in 2025.

There’s growing speculation in financial markets that today’s rate hold may precede a series of rate cuts, potentially starting in June. 

Bank of Canada Governor, Tiff Macklem, when asked about the possibility of rate cuts, hinted at a June rate cut as a possibility, stating, “Yes, a June rate cut is within the realm of possibilities. We are encouraged by what we’ve seen since January. We look at our indicators. They’re all progressing in the same direction, inflation has come down… We’re encouraged by that progress.”

The next scheduled date for announcing the overnight rate target is June 5, 2024. The Bank will release its next full economic and inflation outlook, including risks to the projection, in the MPR on July 24, 2024.

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