By Ketki Saxena
Investing.com – The Bank of Canada left interest rates on hold at 4.5% for its second consecutive meeting, citing the trend of easing in inflation, and reiterating confidence that inflation will continue to slow .
As expected, the Bank reiterated that it is not confirming that the current rate hike cycle has ended, instead confirming that the Bank remains on a conditional pause, and is still prepared to increase rates if needed.
“Governing Council continues to assess whether monetary policy is sufficiently restrictive to relieve price pressures and remains prepared to raise the policy rate further if needed to return inflation to the 2 per cent target,” the bank said.
The Bank of Canada now expects GDP growth this year to grow by 1.4% this year and 1.3%t in 2024, before rebounding to 2.5% in 2025.
The growth is largely due to a robust (expected) 2.3% growth in Q1, following January’s surprise 0.5% GDP growth. The Bank expects growth to be weak for the rest 2023, expecting the economy to have excess supply rather than excess demand in the second half of the year.
Despite labour markets remaining at a historical high, the Bank expects employment to cool as growth slows.
Growth will be “weak” for the rest of 2023, implying that the economy will have excess supply in the second half.
“Rising unemployment could also interact with high household debt and housing vulnerabilities, amplifying the economic downturn in Canada,” officials said in the monetary policy report.