Bank of Canada keeps interest rates on hold
Monetary Policy Report projects inflation to return to target in 2025
Bank expected to stay the course on interest rates in the near term
The Bank of Canada kept its key interest rate on hold at 4.5 per cent on Wednesday, as widely expected. The central bank also released its latest Monetary Policy Report, which projects that inflation will return to the Bank's two per cent target in 2025. However, the Bank now expects inflation to remain above three per cent until the end of 2024.
The Bank's decision to keep interest rates on hold comes as inflation continues to moderate. The annual inflation rate fell to 5.9 per cent in January, down from a peak of 8.1 per cent in June 2022. The Bank now expects inflation to average 3.6 per cent in 2023, before falling to 2.3 per cent in 2024 and 2.0 per cent in 2025.
The Bank's Monetary Policy Report also includes a number of other projections, including:
- Real GDP growth is projected to be 1.0 per cent in 2023, before rising to 2.1 per cent in 2024 and 2.3 per cent in 2025.
- The unemployment rate is projected to rise to 5.8 per cent in 2023, before falling to 5.3 per cent in 2024 and 5.1 per cent in 2025.
- The Bank expects the Canadian dollar to trade at an average of 1.35 US dollars in 2023, before rising to 1.38 US dollars in 2024 and 1.40 US dollars in 2025.
The Bank's next scheduled interest rate announcement is set for May 3, 2023.
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