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Wednesday, December 4, 2024
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Will the Bank of Canada raise its key interest rate again?

Darpan News Desk The Canadian Press, 03 Mar, 2023 12:16 PM
  • Will the Bank of Canada raise its key interest rate again?

One year after the Bank of Canada's aggressive rate hike cycle began, economists widely expect the central bank will stick to its plan of holding its key interest rate steady at its next scheduled announcement.

In making its rate decision next week, the central bank likely feels assured about its move to pause rate hikes, said Karyne Charbonneau, given recent economic data showing inflation is trending downward and the economy has slowed.

"They wouldn't want to announce a pause and then immediately not go through with (it)," said Charbonneau, CIBC's executive director of economics.

Since last March, the central bank has raised its key rate from near-zero to 4.5 per cent, the highest it's been since 2007.

While announcing its eighth consecutive rate hike in January, the Bank of Canada said it would take a conditional pause to allow the economy time to react to higher borrowing costs.

It stressed the pause was conditional, however, making it clear that it'll be ready to jump back in and raise interest rates further if the economy keeps running hot or inflation doesn't come down quickly enough.

The central bank's next rate decision is set for Wednesday.

The most recent inflation data suggests the country is inching closer to normal price growth. Canada's annual inflation rate slowed to 5.9 per cent in January, down from the peak of 8.1 per cent reached in the summer. Recent monthly trends show inflation is heading much closer to the Bank of Canada's two per cent target.

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