As was widely expected, the Bank of Canada held its trendsetting overnight interest rate steady at 5% even as policymakers warned that inflation remains too high.
It was the third consecutive time that Canada’s central bank opted to hold interest rates at current levels, though it has kept the door open to further rate increases if needed.
At 5%, the Bank of Canada’s overnight rate remains at its highest level in 22 years. Economists and futures traders had widely expected the continued interest rate pause by the central bank.
Recent economic data has showed that Canada’s economy is slowing and that the labour market is softening.
In announcing its latest decision, the Bank of Canada removed a key line it had been using that said inflationary risks have increased, but it stressed that it’s prepared to raise borrowing costs again if deemed appropriate.
Futures traders are now betting that Canada’s central bank will begin lowering interest rates in April 2024 and that the overnight rate will be down to 4% by the end of 2024.
