OTTAWA — The Bank of Canada is once again holding its key interest rate steady at 4.5% but isn’t ruling out the possibility of more rate hikes down the line.
Its decision to stay on the sidelines and not raise interest rates further comes as the economy posts stronger-than-expected growth and the labour market remains exceptionally tight — both signs of a still-hot economy.In its quarterly monetary policy report released Wednesday, the central bank’s updated forecasts suggest it expects the economy to still slow, just a little later than previously anticipated.
Employment in Canada has remained resilient amid high interest rates, with the unemployment rate sitting at 5% in February, near record lows. Wages are also growing rapidly, raising concern for the Bank of Canada as it works to bring down price growth.Article contentAs foreign demand for Canadian exports strengthens and the effects of past monetary policy tightening fade, the economy is expected to rebound in 2025 and grow by 2.5%.
Looking ahead, the path back to low inflation and stronger growth in Canada relies on high interest rates working effectively. But after historic monetary policy tightening, the Bank of Canada has hit the brakes. It announced earlier this year it plans to hold its key interest rate steady to allow time for the effects of higher borrowing costs to broaden out in the economy.Article content
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