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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.

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    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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