The Bank of Canada (BoC) is poised to maintain its key interest rate at a 20-year high of five percent, a level unseen since 2001. This comes as the nation grapples with an economic downturn in the second quarter and a softening labor market, according to economists.
The central bank’s aggressive rate hikes since March 2022 have strained both consumers and businesses, leading to an economic contraction. Despite these challenges, economists generally agree that the current interest rates are adequate for restoring price stability and achieving the BoC’s two percent inflation target.
Inflation has also been a significant factor in the bank’s monetary policy decisions. As decreased price pressures were observed across the Canadian economy, the annual inflation rate fell to 3.8 percent in September. This dip in inflation, coupled with the prevailing economic conditions, has led to predictions of rate steadiness.
The expectation of the BoC upholding its peak interest rate comes amidst a weakening economy and slowing inflation. The current situation underscores the delicate balance central banks must maintain between promoting economic growth and controlling inflation.
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