Chrystia Freeland, Deputy Prime Minister and Minister of Finance, is pleased with the Bank of Canada holding key interest rates.
“The Bank of Canada’s decision to maintain its overnight interest rate is welcome relief for Canadians.” Freeland said.
“Inflation has fallen from a peak of 8.1 per cent in June of 2022 to 3.3 per cent in July of this year—and as Statistics Canada has noted, inflation in July was down to 2.4 per cent excluding mortgage interest costs. However, the elevated interest rates being used to bring down inflation are weighing heavily on Canadians.
The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures. Economic growth slowed sharply in the second quarter of 2023, with output contracting by 0.2% at an annualized rate. This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country. Household credit growth slowed as the impact of higher rates restrained spending among a wider range of borrowers.
“As Finance Minister, I fully respect the independence of the Bank of Canada as it delivers on its mandate to return inflation to target, which will support a return to the steady growth and stable prices which were hallmarks of the pre-COVID Canadian economy.
With recent evidence that excess demand in the economy is easing, and given the lagged effects of monetary policy, Governing Council decided to hold the policy interest rate at 5% and continue to normalize the Bank’s balance sheet. However, Governing Council remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed.
“As the Bank continues this work, my number one priority is to use all the tools at my disposal, and to work with partners at other levels of government across Canada, to ensure that interest rates can come down as soon as possible.” Freeland said.
The next scheduled date for announcing the overnight rate target is October 25, 2023