We can all relax once more with today’s rate announcement. The Bank of Canada announced it’s leaving the overnight target rate unchanged at 5% for the second time in a row. This decision will keep the Bank’s lending prime rate at 7.2%.
A recap over the two past years:
In 2022, the Bank of Canada increased the overnight rate seven times. Then, in January 2023, another increase followed, bringing the key rate to 4.5%. The Bank held its key rate at 4.5% until June and increased it to 4.75%. On July 12, the Bank of Canada brought the key rate to 5% to relieve inflation and announced there would be no increase last month.
In its statement today, the Bank said, “Inflation has been easing in most economies, as supply bottlenecks resolve and weaker demand relieves price pressures. However, with underlying inflation persisting, central banks continue to be vigilant. Oil prices are higher than was assumed in July, and the war in Israel and Gaza is a new source of geopolitical uncertainty.”
According to Statistics Canada, Canada’s inflation rate fell to 3.6% in July and rose to 4% in August before decreasing by 0.2% in September. Consumer spending has remained high this year compared to 2022.
It is possible that there will be no further rate hikes in 2023. The last rate announcement for the year is scheduled for December 6, 2023, and we will find out!