The Bank of Canada has stated for the first time that it does not foresee the need for any more interest rate hikes as inflation gradually declines across the country.
Central bank officials made the statement as they announced that they are continuing to hold their benchmark overnight interest rate at its current level of 5%, a 22-year high.
It was the fourth consecutive policy meeting at which the Bank of Canada elected to hold interest rates steady, a move that had been widely expected by both markets and economists.
In its latest policy statement, the Bank of Canada said that data shows economic growth will remain weak over the near-term, and that inflation should decline to the central bank’s 2% annualized target sometime in 2025.
The central bank removed previous language from its policy statements that said it remains prepared to raise interest rates again, if needed.
In speaking to reporters, Bank of Canada Governor Tiff Macklem said: “If the economy evolves broadly in line with the projection we published today, I expect future discussions will be about how long we maintain the policy rate at five per cent.”
The Bank of Canada lowered slightly its economic growth forecast for 2024, saying it now expects growth of 0.8% this year, down from 0.9% previously.
Markets are currently pricing in an interest rate cut at the Bank of Canada’s meeting on April 10 of this year. However, economists polled by Reuters don’t expect the first rate cut until July.
The Bank of Canada’s next decision on interest rates is scheduled for March 6.