The Bank of Canada decided to maintain its target for the overnight lending rate at 5% as was widely expected. This was its fifth consecutive hold after two interest rate hikes last summer.
We have maintained our policy interest rate at 5.00%.
— Bank of Canada (@bankofcanada) March 6, 2024
Learn more: https://t.co/1oZYh7lrBi#economy #cdnecon pic.twitter.com/29y6dRSUEh
In its latest scheduled rate announcement on March 6, 2024, the Bank noted that Canada’s economy had outperformed expectations in the fourth quarter of 2023 but remained sluggish. The Bank also cited various economic factors moving in opposite directions, such as declining business investment but strong gains in exports, leaving the economy overall “in modest excess supply.”
The Bank has focused in on shelter costs as the largest contributing factor to above-target inflation. Although other components of the Consumer Price Index (CPI) are showing signs of normalizing, core measures are still running higher than the Bank’s preferred range. The Bank expects inflation “to remain close to 3% during the first half of this year”, effectively ruling out any rate changes before its June meeting.
In addition to keeping an eye on core inflation readings, the Bank is also likely awaiting news on spending from the next federal budget due to be tabled on April 16, 2024 just six days after the next Bank rate announcement, as well as the impact of the Carbon Tax increase set to come into effect on April 1.
With the next interest rate announcement on April 10, 2024, the Bank of Canada will also publish its full outlook for the economy and inflation in its Monetary Policy Report.
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