Bank of Canada holds interest rate at 4.5 per cent

The Bank of Canada is maintaining the status quo, for now.

On Wednesday the central bank announced it’s holding its key interest rate at 4.5 per cent, saying its latest economic data indicates inflation will continue to fall across Canada. The bank is predicting inflation will drop to three per cent by mid-year, and drop down to two per cent by the end of 2024.

The economy has seen stronger-than-expected growth in recent months, which was a factor in the bank’s decision to maintain the rate.

“In Canada, demand is still exceeding supply and the labour market remains tight. Economic growth in the first quarter looks to be stronger than was projected in January, with a bounce in exports and solid consumption growth,” the bank said in a statement.

“While the Bank’s Business Outlook Survey suggests acute labour shortages are starting to ease, wage growth is still elevated relative to productivity growth. Strong population gains are adding to labour supply and supporting employment growth while also boosting aggregate consumption. Housing market activity remains subdued.”

The bank said it anticipates Canada’s economy will grow by 1.4 per cent this year and 1.3 per cent next year before picking up steam and growing by 2.5 per cent in 2025.

While the interest rate was unchanged in the most recent update, the bank said the rate could be hiked again in future if that becomes necessary in order to return inflation to two per cent.

The bank’s next announcement on the overnight rate is set for June 7.

— With files from The Canadian Press