Wednesday January 24, 2024 | VICTORIA, BC [Updated 10:45 pm PST]
by Mary P Brooke, Editor | Island Social Trends
The Bank of Canada is holding their key interest rate at 5%.
This comes as they remain “concerned about persistence” of the factors that are contributing to inflation.
Inflation hit a peak of 8.1% in summer 2022 and had fallen to 3.4% by December 2023.
The bank’s policy rate has remained at 5% since July 2023.
In today’s Bank of Canada media availability delivered live online from Toronto, both Governor Tiff Macklem and Deputy Governor Carolyn Rogers seemed confident and relaxed in their view that there is no pressing need to increase rates at this time, but neither is there much strength in indicating that they should lower rates.
“It’s not surprising that inflation rose quickly,” said Macklem. But he and his colleagues remain concerned that it’s “not coming down as fast”. He is concerned about “persistence”.
Housing and rent costs have gone up in response to inflation, the bankers noted. The interest rate pressure is “definitely putting pressure on the housing component of inflation”, said Rogers.
Any further escalation of political strife in the Middle East could have economic impacts. If the situation were to escalate “we’d have a larger impact”, said Macklem. “The longer those last and if they become more severe, it could impact transportation costs,” he outlined.
Overall, the inflation situation is “reasonably well balanced”, and while there is no indication yet for the Bank of Canada that interest rates should drop, at this time there is no pressing indication they should be pushed up any further. But with the cautionary remark: “The risk of a rate hike is not zero,” said Macklem.
Difficult phase, but optimistic:
“We’re in a difficult phase. Inflation is still too high and the interest rate is still to high,” said Macklem. “Rates will stay where they are to squeeze out that last bit of steam in inflation,” he told media today.
In response to a media question, Macklem said that any further government spending would add to the problem of controlling inflation.
“But we will get through this. There is certainly room for optimism,” said Macklem.
Next announcement coming March 6:
The next scheduled date for announcing the overnight rate target is March 6, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR on April 10, 2024.
===== ABOUT ISLAND SOCIAL TRENDS:
Island Social Trends reports on “stuff that matters” through a socioeconomic lens so that households, businesses and communities have further insights by which to understand or take action on the various factors of modern living that impact social and economic well-being.
Editor Mary P Brooke has been reporting on South Vancouver Island news since 2008, including regional education, provincial news and national trends.