OTTAWA — The Bank of Canada kept its key interest rate target on hold at five per cent on Wednesday. Here is the text of the central bank's decision:
The Bank of Canada today held its target for the overnight rate at five per cent, with the bank rate at 5.25 per cent and the deposit rate at five per cent. The bank is continuing its policy of quantitative tightening.
Global economic growth slowed in the fourth quarter. U.S. GDP growth also slowed but remained surprisingly robust and broad-based, with solid contributions from consumption and exports. Euro area economic growth was flat at the end of the year after contracting in the third quarter. Inflation in the United States and the euro area continued to ease. Bond yields have increased since January while corporate credit spreads have narrowed. Equity markets have risen sharply. Global oil prices are slightly higher than what was assumed in the January Monetary Policy Report.
In Canada, the economy grew in the fourth quarter by more than expected, although the pace remained weak and below potential. Real GDP expanded by one per cent after contracting 0.5 per cent in the third quarter. Consumption was up a modest one per cent and final domestic demand contracted with a large decline in business investment. A strong increase in exports boosted growth. Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing. Overall, the data point to an economy in modest excess supply.
CPI inflation eased to 2.9 per cent in January, as goods price inflation moderated further. Shelter price inflation remains elevated and is the biggest contributor to inflation. Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the three pre cent to 3.5 per cent range, and the share of CPI components growing above three per cent declined but is still above the historical average. The bank continues to expect inflation to remain close to three per cent during the first half of this year before gradually easing.
Governing Council decided to hold the policy rate at five per cent and to continue to normalize the bank’s balance sheet. The Council is still concerned about risks to the outlook for inflation, particularly the persistence in 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 remains resolute in its commitment to restoring price stability for Canadians.
This report by The Canadian Press was first published March 6, 2024.
The Canadian Press
