The Bank of Canada, in a Monetary Policy Report press conference, announced its decision to maintain the policy interest rate at 5%. Senior Deputy Governor Carolyn Rogers joined the speaker in discussing the policy announcement and report.
The bank emphasized the effectiveness of monetary policy, noting a decrease in total consumer price index (CPI) and core inflation. They expect inflation to move closer to the 2% target throughout the year. Additionally, the bank highlighted positive economic growth trends, with expectations of solid GDP growth and further strengthening in 2025.
Regarding the global economic outlook, the bank revised up its growth forecast, citing strong US economic performance. In contrast, Canada experienced stalled growth in the second half of the previous year, leading to an excess supply situation. However, the forecast indicates a strengthening Canadian economy with GDP growth projected at 1.5% in 2024 and around 2% in the following years.
While CPI inflation eased to 2.8% in February, the bank anticipates further gradual easing in core inflation. They acknowledged risks surrounding the forecast, including potential higher inflation due to global tensions and unexpected house price increases. Despite these risks, the Governing Council decided to maintain the policy rate at 5%.
The speakers emphasized the need for sustained progress towards price stability before considering a policy rate cut. They highlighted the importance of monitoring core inflation, demand-supply balance, inflation expectations, wage growth, and corporate pricing behavior in making future decisions.
In conclusion, the Bank of Canada expressed confidence in the progress made against inflation but emphasized the importance of ensuring the sustainability of this progress.