Officials said recent data suggest the economy is no longer in “excess demand” and their hiking campaign is dampening spending and price pressures. — Reuters
OTTAWA: The Bank of Canada (BoC) held interest rates steady for a third consecutive meeting, acknowledging a stalled economy while keeping the door open to further hikes as officials watch for more progress on slowing inflation.
Policymakers led by governor Tiff Macklem left the benchmark overnight rate unchanged at 5% on Wednesday, the highest level in 22 years.
The pause was expected by markets and by economists in a Bloomberg survey.
Officials said recent data suggest the economy is no longer in “excess demand” and their hiking campaign is dampening spending and price pressures.
They eliminated a line from the October decision that said inflationary risks have increased, but said they’re prepared to raise borrowing costs again if necessary.
Despite that threat, most economists agree the BoC is finished hiking. Wednesday’s decision underscores the communication challenge policymakers face in 2024.
The economy is clearly deteriorating and unemployment is rising, but Macklem and his rate-setting council don’t want to ignite speculation about deep rate cuts – which would ease financial conditions, stoke the housing market and make their inflation-fighting job more difficult.
“The bank’s nod to broader progress against inflation and the fact that the economy is no longer clearly overheated suggest that the central bank isn’t at this point really giving much thought to additional tightening,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, wrote in a report to investors.
Still, the statement shows officials remain focused on upside risks to inflation, and want to see core inflation measures move lower and stay there. — Bloomberg
