The bank has been in a holding pattern since early March, when it kept its benchmark lending rate stable at 4.5 per cent after eight consecutive increases
Since then, the bank has received conflicting economic signals. The Canadian economy is holding up better than expected in early 2023, recent data show, largely defying efforts by the central bank to dampen consumer spending and push up unemployment.
Central-bank economists expect CPI inflation to fall to around 3 per cent by the middle of the year. The bank will publish an updated quarterly forecast for inflation and economic growth on Wednesday. Bank of Canada officials have argued that unemployment will need to rise to get inflation back down to 2 per cent, and they have said that wages are growing too quickly without an accompanying increase in labour productivity.
The Bank of Canada’s quarterly business and consumer surveys, published last week, did contain some hints that the economy is approaching a turning point. Business sentiment continues to worsen and companies are expecting slower sales in the coming year. Consumers reported dialing back spending plans.
The U.S. Federal Reserve, European Central Bank and Bank of England all pressed ahead with interest-rate increases last month, although they dialed back their inflation-fighting rhetoric.
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