Bank Of Canada Leaves Rates Unchanged, Still Concerned About Inflation Outlook

(RTTNews) - Citing the outlook for the economy and inflation, the Bank of Canada on Wednesday announced its widely expected decision to leave interest rates unchanged.

The Bank of Canada held its target for the overnight rate at 5 percent, with the bank rate at 5.25 percent and the deposit rate at 5 percent. The Canadian central bank is also continuing its policy of quantitative tightening.

The decision to leave rates unchanged comes as the Bank of Canada said its Governing Council is "still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation."

The Governing Council wants to see further and sustained easing in core inflation and remains resolute in its commitment to restoring price stability for Canadians, the bank said,

After ending last year at 3.4 percent amid persistently high shelter costs, the bank expects consumer price inflation to remain close to 3 percent during the first half of this year before gradually easing, returning to the 2 percent target in 2025.

"While the slowdown in demand is reducing price pressures in a broader number of CPI components and corporate pricing behaviour continues to normalize, core measures of inflation are not showing sustained declines," the Bank of Canada said.

Meanwhile, the bank said Canadian economic growth will likely remain close to zero through the first quarter of 2024 before strengthening gradually around the middle of 2024.

Household spending is likely to pick up in the second half of 2024, and exports and business investment should get a boost from recovering foreign demand, the bank added.

Overall, the Bank of Canada forecasts GDP growth of 0.8 percent in 2024 and 2.4 percent in 2025, roughly unchanged from its October projection.