The Bank of Canada has announced today that they are pausing interest rate hikes and maintaining the current Prime Rate of 6.70% and the overnight rate of 4.50%. This is the second consecutive time that our central bank has neither increased or decreased interest rates.
Canada’s inflation rate slowed to 5.2% in February, the lowest level since January 2022 . This comes after a 5.9% inflation rate in January. While remaining elevated, price growth slowed sharply for transportation (3.1% vs 5.4% in January), as an elevated base year comparison and a slowing economy drove energy costs down 0.6%, compared to a 5.4% increase in January. Inflation also slowed for shelter (6.1% vs 6.6%), as the slower homeowners’ replacement costs (3.3% vs 4.3%) offset increase mortgage costs (23.9% vs 21.1%) amid the Bank of Canada’s monetary tightening campaign. In the meantime, food costs (9.7% vs 10.4%) remained elevated due to adverse weather conditions. On a monthly basis, the Canadian CPI rose by 0.4%, slowing from the 0.5% increase in the previous month.
High inflation was a large factor in the increasing of interest rates in 2022. The fact that we continue to see a decrease in year-over-year inflation is a great sign for the Canadian economy and an eventual decrease to interest rates.
Many economic experts are anticipating that interest rates will begin to decrease in the fourth quarter of 2023. To read the full Bank of Canada press release click here.
