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December 06, 2023BANK OF CANADA MONETARY POLICY The Bank of Canada maintained its target for the overnight rate at 5%, with the Bank rate at 5.25% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.
Global economy continues to slow and inflation has eased further. Robust consumer spending in the United States resulted in stronger economic growth, but this is likely to weaken in the coming months while interest rates work their way through the economy. The US dollar has weakened against most currencies, including the Canadian dollar. Slower growth in Europe and lower energy prices led to reduction in inflationary pressures. Oil prices are $10-per-barrel lower than was assumed in the October Monetary Policy Report.
In Canada, real GDP contracted at a rate of 1.1% in the third quarter of 2023 following a 1.4% growth in the second quarter. The slowdown in economic activity reflected restrained consumption over the last two quarters and an essentially flat business investment over the past two years. Decline in exports and inventory adjustments were off set with increased government spending and new home construction. Job creation is slower than growth in the labour force, job vacancies have declined further, and the unemployment rate has risen modestly. Wage growth remains around 4% to 5%. The overall evidence suggests that for the fourth quarter economy is no longer in excess demand.
Inflation continues its slowdown to 3.1% in October following a slowdown to 3.8% in September. Shelter price inflation has picked up reflecting growth in rent and other housing costs along with elevated mortgage interest costs.
The Governing Council decided to maintain the policy interest rate and continue to normalize the Bank's balance sheet given the lagged effects of monetary policy and recent evidence of easing excess demand in the economy. Governing Council noted that The Bank remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed. Governing Council will continue to assess the dynamics of core inflation and the outlook for CPI inflation, and is committed to restoring price stability.
The next scheduled date for announcing the overnight rate target is January 24, 2023. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection at the same meeting.
Bank of Canada: Rate Announcement
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