Bank of Canada Continues to Hold the Line on Interest Rates

March 6, 2024 - The Bank of Canada (BoC) once again held the line on its policy interest rate, keeping it at 5% as widely expected. However, while the announcement was dovish in nature, there is no firm sign when interest rates might begin to decrease. The BoC's announcement cited easing inflation in January (the headline rate was down to 2.9%, which is below the top end of the Bank's target range of 1% to 3%) but pointed out that core inflation is still in the 3% to 3.5% range. In addition, "the share of CPI components growing above 3% declined but is still above the historical average." In other words, we aren't quite out of the woods yet, and the BoC expects inflation to remain close to 3% during the first half of the year before it begins to east. The Bank is also continuing quantative tightening. Based on this announcement, we now expect that interest rate decreases won't start until June or July at the earliest, and might be pushed off to later in Q3. At the same time, there is no indication that the BoC will move to increase rates. You can read the announcement here.