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Canada's central bank signals the end of high rates.

 Canada's cent­ral bank has raised interest rates to their highest level since 2007 but sig­nalled a likely

Toronto

pause in its tight­en­ing cycle after it said it saw signs that the eco­nomy had cooled down. The Bank of Canada lif­ted its overnight rate 0.25 per­cent­age points to 4.5 per cent yes­ter­day, mark­ing the eighth con­sec­ut­ive meet­ing at which it has raised bench­mark bor­row­ing costs. In Janu­ary last year, interest rates were 0.25 per cent, where they had been since the start of the pan­demic in March 2020. The BoC was the first cent­ral bank in a G10 eco­nomy to hint that it was ready to pause its tight­en­ing cycle, not­ing in Decem­ber that there had been a slow­down in domestic demand.

Mem­bers of the US Fed­eral Reserve and the European Cent­ral Bank have so far indic­ated that they will "stay the course" and con­tinue to raise rates to tamp infla­tion. ""Eco­nomic growth has been stronger than expec­ted and the eco­nomy remains in excess demand . A major­ity of eco­nom­ists polled by Refin­itiv expec­ted the BoC to enact a quarter-point raise. Fifty-five per cent of the eco­nom­ists polled expec­ted the bank to pause its mon­et­ary tight­en­ing for the remainder of 2023, while the remainder expec­ted it to lower the overnight rate later in the year.

In Decem­ber, Canada's head­line infla­tion rate fell to 6.3 per cent, down from a 6.8 per cent annual pace in Novem­ber. The price of pet­rol and dur­able goods have declined while gro­cery costs con­tinue to increase. "Infla­tion is pro­jec­ted to come down sig­ni­fic­antly this year," the BoC said. The cent­ral bank will keep a close eye on Canada's labour mar­ket, which has held up as bor­row­ing costs have risen.

The eco­nomy added 104,000 jobs in Decem­ber, smash­ing expect­a­tions for a mod­est 5,000 addi­tions.

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  1. William26 January 2023 at 10:30

    The huge addition of jobs (compared to expectations) made this possible and that's one of the main reasons the economy is doing better.

    ReplyDelete
    Replies
    1. Simone26 January 2023 at 13:10

      High rates should stop from now on. Prices should continue to go down on almost all goods throughout the year. I wonder what happened that led to that excess in jobs?

      Delete

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