Bank of Canada interest rate

After eight consecutive rate increases, central bank officials believe they've done enough to get inflation back under control.

“Our view is that the Bank has room to stay on hold even if the ceiling on the U.S. Should the Bank of Canada hit pause this week while the U.S. The Bank of Canada remains worried about service-sector inflation, which is closely tied to the tightness of the labour market and the rapid pace of wage growth. This has led some to speculate that the Bank of Canada may be forced to follow the Fed with more rate hikes. “The reality is that a lengthy pause is likely a prudent path at this point, to more fully assess the impact of the massive tightening of the past year,” Mr. But most analysts believe that weaker-than-expected GDP growth in the fourth quarter of 2022 and a larger-than-expected drop in inflation in January should give the bank confidence to stand pat this week, holding its overnight rate at 4.5 per cent. The consumer price index rose 5.9 per cent year-over-year, down from 6.3 per cent in December and below the Bay Street estimate of 6.1 per cent. More recent data have painted a weaker picture of the economy, bolstering the central bank’s argument that interest rates have gone up enough. “After all, every economics student knows that it takes 12 to 18 months for rate hikes to fully affect the economy, and this week marks the one-year anniversary of rate hike number one.″ That drive to raise borrowing costs will likely grind to a halt on Wednesday, with the central bank widely expected to hold its benchmark interest rate steady, rather than increasing it, for the first time in 12 months. That would put it on a different trajectory than the U.S Federal Reserve, whose officials expect to raise rates several more times. Macklem did not rule out further rate hikes if the economy holds up better, and inflation proves stickier, than the bank is forecasting.