Bank of Canada keeps rates on hold, sees inflation falling as forecast
The Bank of Canada on Wednesday left its key overnight rate on hold at 4.50%, as expected, becoming the first major central bank to suspend its monetary tightening campaign in the face of an anticipated easing of high inflation.
Over the past year, the Canadian central bank raised rates eight times in a row by a total of 425 basis points to tame inflation, which peaked at an annualized rate of 8.1% last year and slowed to 5.9% in January, still almost three times the Bank of Canada’s 2% target.
When the BoC last met to set policy in January, it announced a 25-basis-point hike and said it wanted to leave rates unchanged for a while to let previous increases sink in, as long as prices slowed in line with its expectations.
“Overall, the latest data remains in line with the Bank’s expectation that CPI inflation will come down to around 3% in the middle of the year,” it said in a statement.
The Canadian dollar weakened to a four-month low of 1.3783 per U.S. dollar, or 72.55 U.S. cents, after the announcement, down 0.2% on the day.
“It certainly sounds like the bank is on hold unless they are met with some significant surprise in the data in the months ahead,” said Doug Porter, chief economist at BMO Capital Markets. “We’re expecting them to stay on hold through the through the rest of this year.”
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