The Bank of Canada kept interest rates at 5 per cent as the Canadian economy continues to slow and signs that supply and demand are now approaching balance.
Increases in interest rates have weakened economic growth, with Canadian economic growth averaging 1 percent this year.
The economy is expected to remain weak throughout 2024, before rising to 2.5 percent in 2025.
“With clearer signs that monetary policy is working to ease spending and ease price pressures,” the bank’s statement said.
“The Board of Directors decided to keep the interest rate at 5 percent and continue the normalization of the bank’s balance sheet.”
However, the bank said it remains concerned that progress towards the 2 percent target rate remains slow.
Oil prices are higher than expected, and there is a risk that they may rise if the war between Israel and the Palestinian factions in Gaza turns into a regional conflict.
On the domestic side, inflation expectations among households and businesses remain high; Which also poses a threat to the central bank’s ability to return to its goal.
The bank also indicates that tightening monetary policy; May lead to market fluctuations; It may lead to a sharp slowdown in global growth.
