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– Bank of Canada inflation rate
– Bank of Canada monetary policy.
Bank of Canada Keeps Key Overnight Rate at 5 Percent, Shifts Focus to Cutting Borrowing Costs
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The Bank of Canada (BoC) has announced that it will maintain its key overnight rate at 5 percent, citing a shift in focus towards cutting borrowing costs rather than considering further rate increases. This decision comes after four consecutive policy meetings where the central bank chose to hold rates steady.
One of the key factors influencing this decision is the concern over intrinsic inflation. While annual inflation in December rose to 3.4 percent, exceeding the central bank’s target of 2 percent, it still remains below the peak of 8.1 percent recorded in June 2022.
During a recent speech, Governor Tiff Macklem highlighted the change in the bank’s approach to monetary policy. He stated, “Governing Council’s discussion of monetary policy is shifting from whether our policy rate is restrictive enough to restore price stability, to how long it needs to stay at the current level.” This indicates that the bank is now focused on determining the right timing for reducing borrowing costs.
However, Macklem also emphasized that it is premature to discuss a reduction in the policy rate at this time. This suggests that the bank is not yet ready to provide interest rate relief.
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Economists are closely monitoring the BoC’s actions and have provided their insights on the matter. Avery Shenfeld, Chief Economist at CIBC Capital Markets, commented, “The Bank of Canada isn’t ready, willing, or able to bring interest rate relief just yet, but dangled some hints that lower rates are on the way later this year.”
Overall, the decision to maintain the key overnight rate at 5 percent reflects the BoC’s cautious approach to balancing inflation concerns with the need for economic stimulus. As inflation continues to be an issue of focus, the central bank is carefully considering the timing and extent of any future rate adjustments.
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1. Bank of Canada overnight rate
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