Bank of Canada’s Policy Interest Rate Held steady at 4.50%
April 12, 2023
Canada’s key interest rate had been raised at all eight scheduled policy reviews from March 2022 through January 2023 by a total of 425 basis points from 0.25% to 4.50%, but no change was made at the March 2023 review, nor today. As was the case in March, officials have not ruled out a further hike if needed, and they made a point at both meetings to point out that monetary conditions would continue to be snugged by the lagged effects of previous interest rate tightening and continuing reduction of their balance sheet. Inflation remains well above the 2.0% target at 5.2% last month but has fallen from 8.1% last June. A sharp drop to around 3.0% is anticipated by midyear and an eventual return to 2% is projected by the end of 2024, according to the released statement announcing today’s decision.
Getting inflation the rest of the way back to 2% could prove to be more difficult because inflation expectations are coming down slowly, service price inflation and wage growth remain elevated, and corporate pricing behaviour has yet to normalize. As it sets monetary policy, Governing Council will be particularly focused on these indicators, and the evolution of core inflation, to gauge the progress of CPI inflation back to target.
Today’s meeting coincided with the publication of the Bank of Canada’s quarterly Monetary Policy Report.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Canada
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