Bank of Canada holds interest rate at 5%.

Bank of Canada maintains policy rate on December 6, 2023, continues quantitative tightening

Here are the 8 key takeaways:

  1. Interest Rates Unchanged: The Bank of Canada maintained the overnight rate at 5%, with the Bank Rate at 5.25% and the deposit rate at 5%. This decision reflects the Bank’s current monetary policy stance.
  2. Continuation of Quantitative Tightening: The Bank is persisting with its quantitative tightening policy, aimed at stabilizing the financial environment.
  3. Global Economic Context: The global economy is slowing down, and inflation is easing. In particular, the U.S. shows stronger growth led by consumer spending, but this is expected to weaken due to previous rate hikes. In contrast, growth in the Euro area has weakened, reducing inflationary pressures there.
  4. Oil Prices and Financial Conditions: Oil prices are around $10-per-barrel lower than anticipated in the October Monetary Policy Report. Also, there’s been an easing of financial conditions, with a reduction in long-term interest rates and a weakening of the US dollar against most currencies.
  5. Canadian Economic Growth: Canada experienced stalled economic growth in the middle quarters of 2023, with a contraction in the third quarter. High interest rates have restrained spending, with flat consumer growth and business investment. The labor market has also shown signs of easing, with slower job creation and a slight rise in unemployment.
  6. Inflation Trends: There’s a broad reduction in inflationary pressures across various sectors, aided by the drop in gasoline prices. However, shelter price inflation has increased due to higher rent and housing costs, along with mortgage interest costs. Core inflation measures are around 3.5-4%.
  7. Future Policy Direction: The Governing Council is prepared to raise the policy rate further if necessary, focusing on the balance between demand and supply, inflation expectations, wage growth, and corporate pricing behavior. The primary goal remains to restore and maintain price stability.
  8. Commitment to Price Stability: The Bank reaffirms its commitment to restoring price stability for Canadians, indicating a cautious but responsive approach to future economic developments.

This announcement indicates a cautious approach by the Bank of Canada, acknowledging the global economic slowdown and easing inflation, while also expressing readiness to adjust policies if the economic situation demands.

Author: Maurice Kwok, Mortgage Broker, CPA MBA MA, Broker Lic.#M13000496

416-618-9312 (cell/text/WhatsApp)

Sherwood Mortgage Group, FSRA Lic.#12176

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