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.
The Bank expects the global economy to keep growing at around 3%, with inflation in advanced economies gradually easing. The US economy has been stronger than expected, driven by solid consumer spending and robust business and government investments. Global oil prices have risen, while financial conditions have improved despite higher bond yields.
The Bank has raised its forecast for global GDP growth to 2¾% in 2024 and around 3% in 2025 and 2026. Inflation is slowing in advanced economies, aiming to hit central bank targets by 2025.
In Canada, economic growth slowed in the second half of last year, leading to excess supply. Labor market conditions have weakened, with slower job growth and a gradual rise in unemployment. However, there are signs that wage pressures are easing.
Economic growth is expected to pick up in 2024 due to population growth and increased household spending. Residential investment is strengthening due to continued demand for housing, and government spending is up. Business investment is set to recover gradually, and exports are expected to grow steadily.
Overall, the Bank forecasts GDP growth of 1.5% in 2024, 2.2% in 2025, and 1.9% in 2026. Inflation is expected to slow to around 3% in the first half of this year, then dip below 2.5% in the second half, reaching the 2% target in 2025.
Based on this recent data, the Governing Council has decided to hold the rate. The Council remains concerned about risks to the inflation outlook, but recent months have seen further easing. The Bank will monitor core inflation, along with demand-supply balance, 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 June 5, 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!