OTTAWA, Canada — The Bank of Canada on Wednesday held its key lending rate at 5 percent, saying it is looking for signs that falling inflation will stick before it begins to cut rates.
“While inflation is still too high and risks remain, CPI (Consumer Price Index) and core inflation have eased further in recent months,” the central bank said, adding that its governing council “will be looking for evidence that this downward momentum is sustained.”
The rate hold — the bank’s sixth in a row after aggressive hikes from a record low in recent years to try to throttle soaring prices — was widely expected as analysts eye June for a possible first cut.
The bank said it expected inflation to move below 2.5 percent in the second half of this year and reach its 2 percent target in 2025. Inflation ticked lower to 2.8 percent in February.
READ: Canada’s January inflation rate drops more than expected to 2.9%
It revised upward its global growth forecast and noted that while inflation has continued to slow across most advanced economies, “progress will likely be bumpy.”
In Canada, it noted that labor market conditions have continued to ease and that there were recent signs that wage pressures are moderating.
READ: Canada unemployment rate climbs
It predicted the Canadian economy will pick up this year, growing 1.5 percent, due to population increases and a recovery in household spending. Business investments are likely to recover more gradually while exports will likely see solid growth through 2024, it said.
The Canadian economy is expected to grow 2.2 percent in 2025 and 1.9 percent in 2026, it added.