Bank Of Canada Interest Rate

Bank Of Canada Holds Interest Rate At 5%. Will Spring Finally Bring Relief?

The Bank's key rate is at its highest in 22 years, after 10 increases since March 2022 as the Bank attempts to fight inflation.

They're standing pat for now — but are they getting ready to cut?

Surprising almost no one, the Bank of Canada announced Wednesday morning that it's keeping its overnight lending rate at five per cent, and said the slowing economy is a sign its battle against inflation is working.

While the Bank said it was prepared to raise rates again if needed, it was almost a half-hearted warning, and economists suggested the Bank is likely to start cutting rates as soon as the spring.

"The next move is clearly a cut, with odds pointing to the first move in April," TD senior economist James Orlando wrote in a research note after the Bank's decision was announced. 

CIBC chief economist Avery Shenfeld agreed that a rate hike isn't something the Bank is actually planning on.

"The statement didn't drop the earlier warning that additional rate hikes could still be in the offing if inflation fails to sufficiently cool. But other signals in today's announcement suggest that the Bank isn't really giving serious thought to the prospect of further rate hikes," wrote Shenfeld.

The Bank will start trimming rates in June, according to CIBC's official forecast, said Shenfeld, and will cut the overnight rate to 3.5 per cent by the end of next year.

Wednesday was the third straight rate decision where the Bank left its key rate alone, making this unofficial pause longer than the official "conditional pause" announced by the Bank in January along with a hike of 25 basis points (a quarter of a percentage point). After leaving the rate untouched at meetings in March and April, the Bank raised it by 25 points in June and 25 points in July. Since then, it's stood at five per cent.