The Bank of Canada has maintained its target for the overnight rate at 5% today, with the Bank Rate at 5.25% and the deposit rate at 5%. Here are the key highlights from the announcement:

Global Economic Trends:
Inflation in advanced economies is on the decline, but core inflation remains elevated.Global growth slowed in Q2 2023, largely due to a significant slowdown in China. The U.S. saw stronger-than-expected growth driven by robust consumer spending. Europe's service sector supported growth while manufacturing contracted. Global bond yields have risen, reflecting higher real interest rates, and oil prices are higher than expected.

Canadian Economic Update:
The Canadian economy is experiencing weaker growth to alleviate price pressures. Economic growth contracted by 0.2% at an annualized rate in Q2 2023, impacted by factors like wildfires. Household credit growth slowed due to higher rates, while government spending and business investment supported domestic demand. The labor market is gradually easing, with wage growth around 4% to 5%.

Inflation:
Inflation remains a concern, with CPI inflation averaging close to 3%. Core inflation is running at about 3.5%, indicating little recent downward momentum. Recent gasoline price increases are expected to push CPI inflation higher in the near term.

Monetary Policy:
The policy interest rate remains at 5%. The Bank continues to normalize its balance sheet. The Bank is watchful of underlying inflationary pressures and is ready to increase rates if needed. Assessment factors include excess demand, inflation expectations, wage growth, and corporate pricing behaviour.

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