This morning, the Bank of Canada announced that they have maintained its key interest rate. The prime rate will remain the same at 7.20%. Therefore, for those who have a variable rate credit product, there will be no changes for payments.
Global economic growth slowed down in the last quarter. Inflation in the US and the Euro area have continued to ease. Stock markets have gone up a lot and the prices of oil around the world have been higher than expected.
In Canada, the economy grew more than expected in Q4 of 2023. Consumer spending rose by 1% and exports showed a strong increase, contributing to overall growth. Employment growth is slower than population growth, and there are indications that wage pressures may be easing. Overall, data suggests that there is modest excess supply in the economy.
CPI inflation in Canada eased to 2.9% in January. Prices increased less than before. However, rent and housing costs are still high and contribute the most to the overall increase in the cost of living. The Bank expects inflation to stay close to 3% in the first half of 2024 before gradually decreasing.
Based on this recent data, the Governing Council has decided to hold the rate. The Council remains concerned about risks to the inflation outlook, particularly persistence in underlying inflation. The dynamics of core inflation and the outlook for CPI inflation will continue to be assessed, and the Bank is prepared to increase rates further if needed. The focus continues to be on achieving a balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains committed to restoring price stability for Canadians and achieving the 2% inflation target.
The next Bank of Canada announcement will be on April 10, 2024.
If you'd like to learn more about this recent announcement or would like to know how this affects you, please feel free to reach out to us and we'd be happy to help!