On Wednesday, as the signs pointed to the easing of inflation, the Bank of Canada made the decision to hold the benchmark interest rate steady.
The sixth consecutive decision determined to maintain the central bank’s policy rate at 5.0 percent, which, in turn, informs lending rates on key products such as Canadian mortgages.
The Bank of Canada’s rate tightening cycle commenced over two years ago with the goal of reining in decades-high levels of inflation.
With the annual inflation last noted at 2.8 per cent in February, it is reported that it has cooled since. An updated monetary policy report (MPR) released by the central bank on Wednesday reaffirms the expectation that inflation will return to its two per cent target in 2025.
While the central bank made note of this progress in a statement that accompanied the rate decision on Wednesday, it also stated that it was still seeking evidence that “downward momentum is sustained.”
Also noted was that shelter price inflation remains “very elevated,”, attributable to rising rents and mortgage costs. Food price inflation however, is expected to continue its cooling trend owing to global price declines in the agricultural sector, according to the MPR.
Further, the central bank made note of the fact that recent easing in the labour market suggests that wage pressures are “moderating.” The Bank’s MPR projected further progress in inflation expectations and normalized pricing in the months ahead.
Despite this, rising real estate prices directly linked to strong demand in the housing market and outstanding geopolitical risks still may push inflation higher in the months ahead, the report warned.
— with files from globalnews.ca
