Bank of Canada Rate Announcement - September 6, 2023
September 6, 2023 | Posted by: Ken Fadel
The BoC hit pause on interest rate hikes this morning, leaving its target for the overnight rate unchanged at 5.00%. After increases in both June and July this is the first indication that it believes the economy is slowing sufficiently to remain on the sidelines.
The hold decision came despite inflation having increased in July to slightly above the Bank’s target rate. A contraction in GDP numbers and a continuous upward trend in Canada’s unemployment rate seem to show the economy is losing steam.
Despite this, the BoC stated that it “remains concerned” about persistent underlying inflationary pressures, and that it is still prepared to increase interest again if required.
The BoC has increased its policy rate 10 times since March 2022 for a total of 475 bps. Inflation remains marginally higher than the Bank’s target, but it has fallen substantially from its 39-year high of 8.1% last summer. Increased mortgage costs, a direct result of the BoC’s hikes, are the most significant contributor to the current figure.
Canadians’ optimism on the economy also appears to be sliding. A recent Public Opinion survey of about 1,500 people indicated only 33% of Canadians believe the economic outlook will improve over the next two months. In May that figure was 41%, and in July it was 38%.
The Bank of Canada has two more scheduled rate announcements in 2023 on October 25 and December 6.