Bank of Canada holds key interest rate at 5% in second update of 2024
The Bank of Canada (BoC) has decided to keep its target for the overnight rate at 5%, the bank rate at 5.25%, and the deposit rate at 5%.
The decision came on Wednesday morning and was the second of this year.
Canada’s central bank held the key interest rate at 5% in the last update in January, following three consecutive rate holds in 2023.
Bank of Canada maintains policy rate, continues quantitative tighteninghttps://t.co/1oZYh7lrBi#economy #cdnecon
— Bank of Canada (@bankofcanada) March 6, 2024
The Bank said it is “continuing its policy of quantitative tightening.”
Canadians saw seven interest rate hikes in 2022. In January 2023, another increase followed, bringing the key rate to 4.5%.
The Bank held its key rate at 4.5% — precisely as experts predicted — until June 7, when it was raised to 4.75%. On July 12, the BoC brought the key rate to 5%, with the bank rate at 5.25%, and on September 6, it announced that it was holding those rates. It has since only announced rate holds.
In a recent report, Oxford Economics researchers said they believe the 5% key rate will be held until the middle of 2024, when the BoC will trigger a cycle that lowers the rate.
“Consumer Price Index (CPI) inflation eased to 2.9% in January, as goods price inflation moderated further. Shelter price inflation remains elevated and is the biggest contributor to inflation,” the BoC shared.
“Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average. The Bank continues to expect inflation to remain close to 3% during the first half of this year before gradually easing.”
The next overnight rate announcement will come on April 10, 2024.