OTTAWA, Oct 25 (Reuters) - The Bank of Canada on Wednesday cut its 2023 growth forecast to 1.2% from the 1.8% it predicted in July and said inflation would remain persistently high until the middle of 2024.
"Growing evidence shows that past interest rate increases are working to bring demand and supply back into balance," said the bank, which raised rates 10 times from March 2022 to July 2023 to tackle inflation.
In its quarterly Monetary Policy Report, the central bank said it now expected inflation to return to the 2% target by end-2025. In July it had predicted mid-2025.
The bank said overall inflation was projected to remain "persistently high", at roughly 3.5%, until the middle of 2024, and said the pace of future declines remained uncertain.
"Energy prices no longer pull inflation down and instead add some upward pressure. Shelter price inflation will continue to be elevated," it said.
The Bank left rates at a 22-year high of 5% on Wednesday and said it was prepared to hike again if necessary.
Economic activity was roughly flat in the second quarter of 2023, with some weakness due to temporary factors such as major wildfires and a strike by public sector workers.
The central bank now expects 2024 growth of 0.9%, down from the 1.2% it predicted in July. Third quarter annualized growth is seen at 0.8%, down from 1.5% in July, and 0.8% in the fourth quarter as well.
