Bank of Canada holds interest rate steady at 4.5%
Headline inflation — as measured by year-over-year increases in the consumer price index — has slowed to about six per cent from a peak of around eight per cent over the summer.
The contrast with what’s happening elsewhere will feed questions about whether the Bank of Canada is finished or simply taking a break. Bloomberg News reported this week that the prices for financial assets tied to short-term interest rates imply that investors anticipate another increase before the end of the year. Fed chair Jerome Powell rattled financial markets on March 7 by telling lawmakers bluntly that he would be lifting borrowing costs again.
“With weak economic growth for the next couple of quarters, pressures in product and labour markets are expected to ease,” the Bank of Canada said. “This should moderate wage growth and also increase competitive pressures, making it more difficult for businesses to pass on higher costs to consumers.”Macklem has said several times this year that he’s more worried about being wrong about inflation than he is about inadvertently causing a shallow recession.
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