The Bank of Canada is keeping its key interest rate at 4.5 per cent, marking the second straight hold since rates began rising in March 2022.
The central bank made the announcement Wednesday morning and said it will also be maintaining the Bank Rate at 4.75 per cent and the deposit rate at 4.5 per cent, as it aims to ease inflation with its quantitative tightening policy.
“Inflation in many countries is easing in the face of lower energy prices, normalizing global supply chains, and tighter monetary policy. At the same time, labour markets remain tight and measures of core inflation in many advanced economies suggest persistent price pressures, especially for services,” the Bank of Canada said in a statement on Wednesday.
READ MORE: Bank of Canada holds key interest rate at 4.5 per cent
The latest announcement comes after the bank decided to hold its policy rate at 4.5 per cent last month. Prior to that, the bank raised its key interest rate eight straight times between March 2022 and Feb. of this year.
The bank’s governing council continues to monitor whether monetary policy is working to relieve price pressures, and says it is ready to raise the key interest rate further if needed to return inflation to the two per cent target.
“The Bank remains resolute in its commitment to restoring price stability for Canadians,” the statement reads.
Across the country, demand is still exceeding supply and the labour market remains tight, according to the bank. As a result, economic growth was stronger than expected during the first quarter due to a boost in exports and consumption growth.
“While the Bank’s Business Outlook Survey suggests acute labour shortages are starting to ease, wage growth is still elevated relative to productivity growth. Strong population gains are adding to labour supply and supporting employment growth while also boosting aggregate consumption. Housing market activity remains subdued,” the statement reads.
Insurance comparison website, RATESDOTCA, says the hold on the target rate might be a relief for homeowners with variable rates.
“Hopefully this sends a strong signal to buyers and sellers that rates have hit their peak and rate decreases could happen before the end of the year,” RATESDOTCA mortgage and real estate expert Victor Tran said in a statement. “This could build confidence in the market and potentially prompt more sales.”
The Bank of Canada expects moderate activity in the housing market this year as more households renew their mortgages at higher rates and “restrictive monetary policy works its way through the economy more broadly.”
The next scheduled date for announcing any potential changes to the bank’s key interest rate is set for June 7.
