Canada’s interest rate statement was released with interest rate hikes along with doubts about continued contractionary policy

The Bank of Canada’s interest rate statement is the Bank’s primary tool for communicating its monetary policy to investors. It contains the outcome of their interest rate decision and an explanation of the economic conditions that influenced their decision.

At the end of its last interest rate statement, the Bank of Canada announced that the Governing Council was “considering whether to raise interest rates further to balance supply and demand and bring inflation back to target levels” This decision was announced at the same time as a 50 basis point increase in interest rates. The Bank of Canada decision is still weighing on markets, but the job is not done yet, while this was a partial indication of interest rates as it neutralized any strict approach at CAD.

Growth and Inflation Outlook

The BoC expects Canadian economic growth to stall in the first half of next year. This has led the BoC to keep interest rates at their highest levels. However, as noted in the weekly meetings, inflation in Canada is currently very stable. The Bank of Canada notes that the longer businesses and consumers expect inflation to remain above target, the greater the risk that inflation will stabilize. Consequently, the more inflation becomes entrenched, the more the Bank of Canada will have to raise the interest rate.