The Bank of Canada today increased its target for the overnight rate to 4.25%, with the Bank Rate at 4.5% and the deposit rate at 4.25%. The Bank is also continuing its policy of quantitative tightening.
Inflation around the world remains high and broadly based. Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October Monetary Policy Report (MPR).
In Canada, GDP growth in the 3rd quarter was stronger than expected, and the economy continued to operate in excess demand. Canada’s labor market remains tight, with unemployment near historic lows.
While commodity exports have been strong, there is growing evidence that tighter monetary policy is restraining domestic demand: consumption moderated in the third quarter, and housing market activity continues to decline.
Overall, the data since the October MPR support the Bank’s outlook that growth will essentially stall through the end of this year and the first half of next year. CPI inflation remained at 6.9% in October, with many of the goods and services Canadians regularly buy showing large price increases. Measures of core inflation remain around 5%.
Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target. Quantitative tightening is complementing increases in the policy rate. We are resolute in our commitment to achieving the 2% inflation target and restoring price stability for Canadians.
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