The Conference Board of Canada - AERIC Inc.

03/06/2024 | News release | Distributed by Public on 03/06/2024 10:31

The Bank of Canada Holds the Overnight Rate at 5 per Cent

  • The Bank of Canada has decided to hold its target for the overnight rate at 5 per cent, with the Bank rate at 5.25 per cent, and the deposit rate at 5 per cent. This is in line with the prediction from our latest national forecast, and a result of a slowing Canadian economy.
  • Global economic growth slowed in the fourth quarter of last year.
  • Statistic Canada's most recent Daily shows Canada's economy expanded in the fourth quarter, albeit at a weak pace and below potential, in part due to a strong increase in exports. Real GDP advanced 0.2 per cent after contracting 0.1 per cent in the third quarter. Final domestic demand contracted due to large business investment decline.
  • Data from the final quarter of 2023 points to the economy being in excess supply with employment growth lagging population growth and signs that wage pressures are possibly alleviating.
  • The Bank is continuing with its quantitative tightening. As of this announcement, the Bank's Government of Canada bond holdings are sitting around ¬¬¬¬¬¬¬¬¬$270 billion.
  • CPI inflation eased to 2.9 per cent in January. Shelter price inflation is the biggest contributor. Year-over-year and three-month measures of core inflation are within 3 per cent to 3.5 per cent. The Bank expects inflation to be around 3 per cent for the first half of the year.
  • The Governing Council remains strong in its commitment to restoring price stability. The council is concerned about risks to the inflation outlook, particularly persistent underlying inflation, and wants to see further and sustained easing in core inflation. It continues to be focused on the balance of supply and demand, inflation expectations, wage growth, and corporate pricing behaviour.