The Bank of Canada left its benchmark interest rate unchanged in its fifth consecutive decision amid ongoing signs that its tightening cycle might have peaked.
The central bank’s policy rate remains at 5.0 per cent on Wednesday, with the hold widely expected by economists.
The Bank of Canada’s policy rate sets the cost of borrowing for institutions across the country and informs interest rates Canadians pay on debt, including mortgages and other credit products.
Efforts to tame inflation in the current tightening cycle began just over two years ago and saw the Bank of Canada raise its policy rate by 4.75 percentage points over the course of 10 hikes.
Officials at the central bank have signalled that the benchmark rate might now be high enough, shifting discussions now to how long the rate needs to stay elevated to bring inflation all the way back down to the Bank of Canada’s mandated two per cent target.
Annual inflation cooled more steeply than expected in January, declining to 2.9 per cent from 3.4 per cent the previous month.
But the Canadian economy has outperformed the Bank of Canada’s expectations, managing to eke out slight gains in the fourth quarter of 2023 compared with expectations for flat growth in the central bank’s latest projections.
More to come.
