Bank of Canada Rate Announcement - March 8, 2023
March 8, 2023 | Posted by: Ken Fadel
As predicted, the BoC today held its target for the overnight rate at 4.50%. This is the first break in rate increases since March of last year.
The global economy has evolved broadly in line with the outlook detailed in the Bank’s January Monetary Policy Report. Global growth continues to decelerate, and inflation is dropping primarily due to lower energy prices. In the United States, short-term outlooks for growth and inflation are both higher than what was expected in January. Labour markets remain very tight resulting in a persistent elevated core inflation.
In Canada, economic growth was flat in the fourth quarter of 2022, coming in lower than the Bank’s projection. Restrictive monetary policy continues to weigh on household spending and business investment. Our labour market remains tight as employment growth has been surprisingly strong, while productivity has declined in recent quarters.
Inflation dropped to 5.9% in January, reflecting lower price increases for energy, durable goods and some services. Food and shelter price inflation remains high and continues to stress the finances of Canadian households. Expected weak economic growth over the next couple of quarters should begin to ease pressures seen in product and labour markets.
All told, the latest data is in line with the Bank’s expectation that inflation will decrease to around 3% by the middle of this year. Year-over-year measures of core inflation dropped to about 5%, and 3-month measures sit around 3.50%. Positive news, but still well above the Bank’s 2% target.
The BoC will continue to assess economic developments and the impact of past rate increases and is definitely willing to increase the policy rate further if necessary. The Bank “remains resolute in its commitment to restoring price stability for Canadians.”
The next interest rate announcement is scheduled for April 12, 2023. At that time, the Bank will also be issuing its next full outlook for the economy and inflation.