The Bank of Canada has announced its decision to maintain the policy rate at 5% and continue its quantitative tightening strategy. The Bank Rate remains at 5¼% and the deposit rate at 5%.
According to the Bank, the global economy is expected to grow at a rate of about 3%, with inflation in most advanced economies gradually easing. The US economy has shown strength, driven by resilient consumption and strong business and government spending. The euro area is projected to recover from weak growth, while global oil prices have increased above previous assumptions.
In Canada, economic growth stalled in the second half of last year, leading to excess supply in the economy. Employment growth has been slower than the working-age population, with the unemployment rate reaching 6.1% in March. The Bank forecasts a pickup in economic growth for 2024, driven by population growth and increased household spending.
The Bank of Canada has revised its forecast for global GDP growth to 2¾% in 2024 and around 3% in 2025 and 2026. Inflation rates are expected to reach central bank targets by 2025, with CPI inflation projected to be close to 3% in the first half of this year and gradually decrease thereafter.
Governing Council has decided to maintain the policy rate at 5% based on the economic outlook. The Council will continue to monitor inflation trends, with a focus on core inflation, demand-supply balance, inflation expectations, wage growth, and corporate pricing behavior. The Bank remains committed to restoring price stability for Canadians.
Looking ahead, the Bank of Canada's next announcement for the overnight rate target is scheduled for June 5, 2024, with the full outlook for the economy and inflation to be published in the Monetary Policy Report on July 24, 2024.