By Ketki Saxena
Investing.com -- As had been widely expected, the Bank of Canada kept its key overnight rate on hold at the 22-year high of 5%.
Bets for a hold from the Canadian central bank had been nearly unanimous after Canadian Q2 GDP unexpectedly shrank to 0.2% annualized, far lower than the BoC's forecast for 1.5% annualized GDP growth.
In other signs that cracks are showing in the Canadian economy, the unemployment rate has been rising for three consecutive months, reaching 5.5%.
Meanwhile, inflation remains high, rebounding to 3.3% in July, with the BoC's core inflation measures also staying above 3%.
To tame inflation, the Bank of Canada has hiked rates 10 times since March 2022, raising rates by 475 basis points so far.
While today's call for a rate hold was nearly unanimous, economists remain divided on what comes next, with some forecasting that rates are done and that rate cuts can begin as early as spring 2024. Others however think that at least one more rate hike may be on the way, pointing out that the Bank of Canada must move to some degree in lockstep with the US Federal Reserve, or risk a devaluation of the Canadian currency.