The Bank of Canada (the central bank) announced that it would keep the main interest rate at 4.5%, pointing out that the recent economic data reinforced its belief that price inflation will continue to slow in the coming months.
“Radio Canada” quoted Bank of Canada Governor Tiff McCallum as saying last night that “inflation is dropping rapidly” and is expected to reach “up to 3.0 percent this summer.”
However, despite this decline in inflation, “the economy is expected to grow modestly”.
It is noteworthy that the latest Statistics Canada data on inflation indicated that its annual rate continued to slow in February to 5.2 percent, down 0.7 percentage points from its level of 5.9 percent in January, and reaching a level below experts’ expectations for the second month in a row.
McCallum said the Bank of Canada’s target for inflation is an annual rate of 2%, “and a lot of things have to happen to reach that target.”
The Bank of Canada’s decision to keep the main interest rate unchanged did not come as a surprise to economists, as the Bank had previously indicated its intention to freeze interest rate increases for the time being.
It is noteworthy that the Bank of Canada raised the basic interest rate eight times between March 2022 and January 25, 2023. These increases were specifically aimed at controlling inflation by increasing the cost of credit for consumers and businesses.
