For the 2nd time in a row, the Bank of Canada has held rates steady at 4.5%. The Bank has also indicated that it will be continuing its policy of quantitative easing. According to their Monetary Policy Report, the Bank expects the rate of inflation to drop to “around 3% in the middle of this year.”
Across Western nations around the globe, inflation is easing in part thanks to lower energy prices, a normalizing global supply chain and tighter monetary policy.
Tiff Macklem, The Bank of Canada’s governor, told reporters Wednesday that Canadians can expect “welcome relief” on the inflation front after years of rampant price acceleration. Yet, this slight breather doesn’t come without a caveat, with the Bank warning that interest rates could rise again to bring inflation back down to its stated two percent target.
The Bank of Canada does project Canada’s economy to increase by 1.4% in 2023 and 1.3% next year and its long term forecast for 2025 is at 2.5%. Typically, an increase in GDP (economic growth) will trigger an increase in average interest rates, while a decrease in real GDP (a recession) causes a decrease in economic interest rates.
The Bank of Canada is scheduled to meet next on June 7, 2023.
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