The Bank of Canada (BoC) announced Wednesday that it is holding the key interest steady at 5%, citing continued concerns about the risks posed by underlying inflation.
“Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour,” the bank said in a statement.
The BoC expects inflation to remain close to 3%, above its 2% target, during the first half of 2024 before easing gradually.
It had been widely expected by economists that the bank would hold the rate.
The bank began raising interest rates in March 2022, hitting 5% in June of last year where it has held the rate for its past five meetings.
“The Bank of Canada is taking a similar stance to the Fed, in wanting to be sure that the last mile on inflation is achievable before cutting interest rates,” commented Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management.
“The BoC expects this last mile to 2% to be ‘slow and uneven,’ meaning it may not be as straightforward as progress made to date. Their position is more challenging compared to the Fed, who have the luxury of economic strength to give them the time to be patient in planning their first rate cuts.”