Senior Director of Canadian Economics
It’s ‘Two and Through’ as the Bank of Canada Pauses Interest Rate Hikes Again
As was widely expected, the Bank of Canada kept the overnight policy rate unchanged today at 5.00%, following 25 basis point increases in both June and July. There was plenty of evidence to back the move. However, still broad-based inflationary pressures remain a concern. Taken together, while the Bank decided to stay on hold today, “Governing Council remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed.”
Reading the tea leaves of the press release that accompanied the announcement, it seems that the Bank is confident it has done enough to gradually bring the Canadian economy back to balance. And we agree. Now it’s just a waiting game as the Bank of Canada surveys the impact of past hikes on economic activity. Once the Bank’s satisfied the economy has slowed enough to support a gradual return of inflation to its 2% target, we expect it to begin cutting interest rates. This may happen as early as the first quarter of 2024.
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