The Bank of Canada decided to maintain its target for the overnight lending rate at 5%. This was its third consecutive hold after two interest rate hikes over the summer.
In its latest scheduled interest rate announcement on December 6, 2023, the Bank cited growing evidence that higher interest rates are restraining spending, slowing economic growth, and helping to ease labour markets, suggesting that the economy may no longer be in excess demand.
The slowdown in economic activity is also helping to relieve inflationary pressures in a broad range of goods and services, with the Bank’s preferred measure of core inflation coming in around 3.5-4% in recent months. Despite this, the Bank noted that housing price inflation continues to grow, reflecting more rapid growth in rent and other housing-related costs along with the continued contribution from higher mortgage interest costs.
With further signs that monetary policy is moderating spending and relieving price pressures, the Bank is still concerned about risks to the outlook for inflation and remains prepared to hike rates further if necessary.
The Bank of Canada’s next scheduled interest rate announcement will be on January 24, 2024, at which time it will also publish its full outlook for the economy and inflation in its Monetary Policy Report.
