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Bank of Canada holds key interest rate at 5% again, saying it’s still too


The Bank of Canada has held its key interest rate at five per cent again, saying that it’s still too soon to consider rate cuts while underlying inflation persists.

Economists were widely expecting the central bank to hold the rate. The bank said in a note on its website that it was still concerned about underlying inflation, which strips out volatile items like food or fuel.

Bank of Canada governor Tiff Macklem elaborated on those concerns during a press conference following the announcement. 

He said there are still global risks — like the attacks on Red Sea shipping routes, which have impacted global shipping costs — that could feed into higher inflation if they escalate.

WATCH | Macklem explains why the bank cares about core inflation: 

‘Why do we care about core inflation?’ Bank of Canada governor explains

Tiff Macklem, governor of the Bank of Canada, says core inflation — which strips out volatile parts of the consumer price index — gives the bank a sense of where the trend is.

Domestically, “we are seeing a gradual easing in underlying inflationary pressures. The risk is that stalls,” he said. “We don’t want inflation to get stuck, materially, above our [2 per cent inflation] target.”

The central bank expects inflation to stay close to three per cent during the first half of this year before it slowly eases.

Higher interest rates need ‘more time,’ says Macklem

In his prepared remarks, Macklem said that there have been “no big surprises” since the Bank last held an interest rate announcement in January.

While the Canadian economy has staved off a recession, 2023 was one of its weakest recent years for growth. GDP increased by an annualized rate of one per cent in January.

Meanwhile, inflation came down to 2.9 per cent in January as price growth slowed. Groceries were still getting more expensive, but at a slower rate.

WATCH | Inflation has eased. Why isn’t the bank cutting interest rates? 

Inflation’s down. So where are the interest rate cuts?

After two years of aggressive interest rate hikes, inflation is seemingly back under control, causing many Canadians to start asking: Where’s the relief? CBC’s Peter Armstrong looks at whether the Bank of Canada has accomplished its goals and what we know about when rates could start to come back down.

“The assessment of the governing council is that we need to give higher interest rates more time to do their work,” said Macklem.

The Bank of Canada has maintained that it takes about 18 to 24 months for interest rate changes to work their way through the economy.

“It would be great if this worked faster, it would be great if it was less painful. But unfortunately, monetary policy, it does work slowly,” Macklem said later, while taking questions from reporters.

“It is an indirect channel. It’s got to work through the economy. It takes time to do that.”

A building that says Bank of Canada on it.
The Bank of Canada is seen on Sept. 6, 2017 in Ottawa. The central bank has maintained that it takes about 18 to 24 months for interest rate…



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