The Bank of Canada on January 24, 2024 held its target for the overnight rate at 5 percent, with the Bank Rate at 5.25 percent and the deposit rate at 5 percent. The Bank is continuing its policy of quantitative tightening. Global economic growth continues to slow, with inflation easing gradually across most economies. While growth in the United States has been stronger than expected, it is anticipated to slow in 2024, with weakening consumer spending and business investment. In the euro area, the economy looks to be in a mild contraction. In China, low consumer confidence and policy uncertainty will likely restrain activity. Meanwhile, oil prices are about $10 per barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have eased, largely reversing the tightening that occurred last autumn.
The Bank now forecasts global GDP growth of 2.50 percent in 2024 and 2.75 percent in 2025, following 2023’s 3 percent pace. With softer growth this year, inflation rates in most advanced economies are expected to come down slowly, reaching central bank targets in 2025. CPI inflation ended the year at 3.4 percent. Shelter costs remain the biggest contributor to above-target inflation. The Bank expects inflation to remain close to 3 percent during the first half of this year before gradually easing, returning to the 2 percent target in 2025.
Given the outlook, Governing Council decided to hold the policy rate at 5 percent and to continue to normalize the Bank’s balance sheet. The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation. Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior. The Bank remains resolute in its commitment to restoring price stability for Canadians.
Source: IBP