Account Login/Registration

Access VictoriaNow using your Facebook account, or by entering your information below.


Facebook


OR


Register

Privacy Policy

Bank of Canada holds interest rate at 5%

The Bank of Canada once again held its key interest rate steady at five per cent Wednesday, encouraged by evidence that higher rates are helping bring inflation down.

“Higher interest rates are clearly restraining spending: consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year,” the central bank said in a news release detailing its final decision of the year.

The combination of weaker growth and a cooling job market suggests demand is no longer outpacing supply in the economy, the central bank added.

This slowdown, the Bank of Canada has argued, is necessary to restore price stability.

Wednesday’s decision marks the third consecutive time the Bank of Canada has opted to keep its key rate unchanged as forecasters widely expect the Bank of Canada’s next move will be a rate cut.

However, the Bank of Canada is not ruling out future rate hikes just yet.

<who>Photo Credit: Canadian Press

“Governing council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed,” the central bank said, noting it wants to see underlying price pressures ease further.

The central bank will have to switch to cutting interest rates soon enough, TD director of economics James Orlando said, as the unemployment rate continues to rise and spending in the economy takes a hit. But for now, it makes sense for the central bank to keep its guard up.

"A hold today was the only option for the BoC," wrote Orlando in a note to clients. "But with inflation still above three per cent, we get why the BoC isn't ready to declare victory."

Weighed down by higher borrowing costs, the Canadian economy has struggled to consistently grow this year. The most recent GDP report showed the economy contracted by 1.1 per cent on an annualized basis in the third quarter.

Meanwhile, inflation has eased considerably over the last year, reaching 3.1 per cent in October.

The Bank of Canada projected in October that inflation will fall back to the two per cent target in 2025.

Its next rate decision, along with updated economic forecasts, is set for Jan. 24.



Send your comments, news tips, typos, letter to the editor, photos and videos to [email protected].



Weather
webcam icon

weather-icon
Sun
7℃

weather-icon
Mon
7℃

weather-icon
Tue
8℃

weather-icon
Wed
7℃

weather-icon
Thu
8℃

weather-icon
Fri
10℃

Top Stories

Follow Us

Follow us on Instagram Follow us on Twitter Like us on Facebook
Follow Our Newsletter