October 25, 2023 | Real Estate News
Breaking News: Bank of Canada Keeps Key Interest Rate Steady at 5%
In a significant decision announced today, the Bank of Canada has opted to maintain its key interest rate at 5%, a move widely expected by analysts. Governor Tiff Macklem had a press conference at 11 a.m. to discuss the central bank’s decision further. Alongside this decision, the bank is set to release updated projections for inflation and economic growth.
This decision comes in the backdrop of heightened inflation concerns. Despite anticipation for a rate hike, the Bank of Canada appears cautious, preferring to keep the possibility of further rate increases open should inflation continue to pose a challenge.
Over the past year and a half, the central bank has raised interest rates ten times, resulting in higher borrowing costs. This trend has started to weigh on consumer spending and business investments while also contributing to an increase in unemployment. The Bank of Canada believes that this slowdown is bringing the Canadian economy closer to equilibrium, which is essential for price stability.
In addition to keeping the interest rate unchanged, the bank has adjusted its economic forecasts. It has revised its near-term inflation forecast upward, citing geopolitical uncertainties such as the Israel-Gaza conflict, which could potentially drive up global oil prices and subsequently affect overall inflation rates. The Bank of Canada anticipates that global oil prices will be approximately $10 higher over the next two years compared to its July forecast.
The bank’s new projection indicates that the annual inflation rate is expected to hover around 3.5% for the next year, a figure higher than its previous estimate from July. However, it foresees a gradual return to the bank’s 2% inflation target by mid-2025. Notably, the Consumer Price Index inflation had reached 3.8% in September, although this was a decrease from the peak of 8.1% observed last summer.
In summary, the Bank of Canada’s decision to maintain the key interest rate at 5% reflects its cautious approach to the current economic environment characterized by inflationary pressures and global uncertainties. The central bank remains vigilant and ready to respond should inflation persist at elevated levels.
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