Bank of Canada Holds Rate as Expected

2023-09-06 14:11 By Andre Joaquim 1 min. read

The Bank of Canada held the target for its overnight rate unchanged at 5% in its September 2023 meeting, as largely expected by financial markets to mark another pause in its tightening cycle, and signaled that future rate decisions will be based on the latest economic signals.

The central bank based the decision on evidence of a marked slowdown in the Canadian economy, with output unexpectedly contracting by an annualized 0.2% in the second quarter as household credit growth slowed and impacted aggregate demand.

Consequently, the possibility of a longer period of transmission of tighter monetary policy drove the Governing Council to further evaluate the impact that current borrowing costs have on inflation and aggregate demand, warranting the refrain from further hikes.

Still, the Bank noted that more rate hikes could still be done should inflationary trends remain above the 2% target.



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