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The Bank of Canada increased the overnight rate today to 5% despite the decline in the inflation rate to 3.4% as of May 2023 because of lower energy prices. Food and shelter inflation remains high.

In a recent speech, Deputy Governor Paul Beaudry stated: "We know this tightening cycle has not been easy for many Canadians. But the alternative—not controlling inflation—would be far worse, particularly for people living on low or fixed incomes." He pointed out that continued strong demand...

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The Bank of Canada increased the overnight rate today to 4.75% citing persistent inflation at 4.4%, a hot job market and stronger than expected economy. 

By raising the overnight rate, the expected effect in the coming months is: "In our baseline forecast, the labour market will soften as the economy slows. Wage growth will ease. Businesses will revert to more normal price-setting behaviour. And near-term inflation expectations will come into line with the inflation target," said...

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Today’s Bank of Canada rate hold announcement marks almost four straight years that the key benchmark rate has remained unchanged, since September 8, 2010. Great news if you have a variable-rate mortgage or home equity line of credit; the prime rate stays at 3%.

 

The announcement noted that “the risks to the outlook for inflation remain roughly balanced, while the risks associated with household imbalances have not diminished.” With these considerations, the Bank is maintaining its monetary policy stimulus, and remains neutral with respect to the timing and direction of the next change.

 

The next rate-setting day is October 22nd.

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