Bank of Canada: 5% Interest Rates Stay Put! What’s Next for Your Money?
In a recent announcement on October 25, 2023, the Bank of Canada decided to maintain its target for the overnight rate at a substantial 5%. This decision reflects the Bank’s continued commitment to its strategy of quantitative tightening, which means the central bank is taking steps to reduce the amount of money circulating in the economy to help control inflation. This move is also a response to the global economic landscape and domestic economic conditions.
The reason for this decision is that the global economy is slowing down, and previous interest rate increases have started to affect economic activity in Canada. People are spending less, especially on things like housing and durable goods, and businesses are investing less because borrowing is more expensive. Despite this, the job market is still quite strong, and wages are going up.
The bank expects the Canadian economy to grow slowly this year and next but pick up in late 2024 and 2025. Inflation has been a bit all over the place, but they expect it to eventually return to their target of about 2%.
The central bank is being cautious and wants to make sure that prices remain stable. They are ready to raise interest rates further if they see signs of inflation getting out of control. Their focus is on factors like inflation expectations, wage growth, and how companies are setting prices. They are committed to keeping prices stable for Canadians.
The next time they will announce any changes to interest rates is in December 2023, and they will provide more economic and inflation forecasts in January 2024.