No Change in Interest Rates: Bank of Canada Holds at 5%

Bank of Canada Holds Steady on Interest Rate, Further Cuts on Hold for Now

The Bank of Canada (BoC) announced on Wednesday, March 6, 2024, that it would maintain its key interest rate at 5%, citing the need to ensure inflation remains under control. This decision comes as no surprise to economists, who had largely anticipated no change.

While Canada’s inflation rate has shown signs of cooling, dropping to 2.9% in January 2024, the Bank remains concerned about underlying inflationary pressures which are still running above their target range of 1% to 3%.

Governor, Tiff Macklem emphasized the need for continued vigilance: “We’ve come a long way, but it’s still too early to loosen the restrictive policy.” He pointed out that higher interest rates have played a crucial role in curbing inflation by slowing down excessive spending within the economy.

“We don’t want to keep monetary policy this restrictive for longer than we have to, But nor do we want to jeopardize the progress we’ve made in bringing inflation down.” – Tiff Macklem, Governor, BoC.

Forecasters widely expect the central bank to begin lowering interest rates around the middle of the year.

Experts anticipate a wait-and-see approach from the BoC in the near future.

Economists like CIBC’s Avery Shenfeld noted that the Bank “didn’t make any great leaps towards an actual rate cut today,” suggesting a cautious approach moving forward. Similarly, TD’s James Orlando highlighted the Bank’s ability to wait due to “economic growth eking out small, but positive, growth” at the end of 2023.

Bank of Canada Interest Rate History (Past 2 Years):

• January 24, 2024: 5.00% (unchanged)
• December 6, 2023: 5.00% (unchanged)
• October 25, 2023: 5.00% (unchanged)
• September 6, 2023: 5.00% (unchanged)
• July 12, 2023: 5.00% (+0.25%)
• June 7, 2023: 4.75% (+0.25%)
• April 12, 2023: 4.50% (unchanged)
• March 8, 2023: 4.50% (unchanged)
• January 25, 2023: 4.50% (+0.25%)
• December 7, 2022: 4.25% (+0.50%)
• October 26, 2022: 3.75% (+0.50%)
• September 7, 2022: 3.25% (+0.75%)

Conclusion and Future Outlook:

The Bank of Canada’s decision to hold rates reflects their cautious stance on inflation. While inflation has shown signs of moderating, the Bank is likely to maintain its current policy until they are confident that inflationary pressures are under control and on a sustained downward trajectory.

Looking ahead, forecasts suggest potential interest rate cuts might occur around mid-2024.

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However, the Bank’s decision will ultimately depend on the trajectory of inflation, economic data, and their assessment of potential risks and uncertainties. The Bank is expected to closely monitor economic developments and provide further guidance on the future path of interest rates during their upcoming policy announcements.