Bank of Canada’s (BoC) Governor, Tiff Macklem, is anticipated to maintain the current lending rate at 5% in the upcoming meeting on Wednesday, October 25, 2023. This decision comes as the highest rate since 2001 seeks to temper an excessively warm economy. Despite this, Macklem has indicated potential additional monetary tightening if inflation consistently overshoots its target.
The decision is influenced by a recent consumer price index (CPI) report that showed a slowdown in price acceleration to 3.8%. An MNI survey involving numerous economists also predicts a steady 5% target rate in the near future.
However, despite these measures, there are signs of economic deceleration. The Canadian economy contracted by a minor 0.2% in the second quarter, and unemployment rates have risen due to an increase in labor supply triggered by record-level immigration.
Economic observers including Andrew Grantham from CIBC and Nathan Janzen from RBC, along with the BoC’s business outlook survey, have also forecasted that the BoC will hold its key interest rate steady. This prediction comes as the Canadian economy adjusts to higher interest rates and downward inflation trends.
The BoC has held its interest rate at five per cent, considering future hikes due to ongoing price pressure concerns. However, mixed economic indicators since September make a rate hike unlikely.
According to Statistics Canada, inflation rose annually in July and August but eased in September. The annual rate dropped to 3.8 per cent as indicated by the consumer price index report.
Consumer spending has also slowed with retail sales, including sales at new and used car dealers, falling by 0.1 per cent in August. Despite rising employment, the job market has lost robustness with a 5.5 percent unemployment rate.
Ontario Premier Doug Ford (NYSE:) has expressed concerns to Prime Minister Justin Trudeau and Bank of Canada Governor Tiff Macklem about the impact of previous rate hikes on Canadians and businesses, particularly affecting mortgage holders. He conveyed his concerns through letters, highlighting the economic challenges facing the nation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Read the full article here