What happens next after the Bank of Canada held interest rates?
CTV
The Bank of Canada announced Wednesday it would hold its key overnight rate at 4.5 per cent after eight consecutive interest rate increases – and experts said the pause could last throughout 2023 as the bank watches the economy responds to its policy moves so far.
The Bank of Canada announced Wednesday it would hold its key overnight rate at 4.5 per cent after eight consecutive interest rate increases – and experts said the pause could last throughout 2023 as the bank watches the economy responds to its policy moves so far.
Economists told BNNBloomberg.ca the months ahead will reveal how economic indicators – in particular, inflation and the labour market -- react to the dramatic series of hikes that began last March at a pandemic-low interest rate of 0.25 per cent.
“The question now is how strongly Canada’s debt-saddled economy responds following months of aggressive monetary tightening,” Marc Desormeaux, principal economist of Canadian economics at Desjardins, told BNNBloomberg.ca in a Wednesday phone interview.
Leslie Preston, senior economist at TD Economics, said in a Wednesday phone interview that the Bank of Canada is in a “wait and see period” as the cumulative effect of the last year of monetary policy sets in.
CIBC chief economist Avery Shenfeld echoed the idea that the bank could take a hands-off approach to interest rate adjustments this year.
“What likely comes next for the Bank of Canada is a very long nap, in the sense that interest rates are unlikely to change over the balance of 2023 if the economy performs as we expect,” he said.
The Bank of Canada (BoC) highlighted the still-tight labour market in its Wednesday statement on the rate decision, and referenced falling inflation that at 5.9 per cent still sits well above the central bank’s two per cent target.
