Bank of Canada: Policy interest rates may remain unchanged at 4.5%
2023-04-26
■Although the year-on-year increase in CPI in March was the lowest in 7 months in a year, prices remained unchanged in the
■The central bank will continue to tighten monetary policy while still paying attention to price fluctuations
In March, Canada's consumer price index (CPI) rose 4.3% year-on-year, and housing loan interest expenses surged. On the other hand, the decline in energy prices and the slowdown in food prices reached the lowest level in one year and seven months. The Bank of Canada (BOC) has emphasized that the core CPI (median and average of adjusted prices) has slowed from its peak in June last year to 4.5%. The unemployment rate remained at a low level of 5.0% in March, and the average hourly wage (for regular employees) remained at a high level of 5.2% year-on-year. On the 20th, Bank of Canada Governor Macklem, President of BOC, stated in a Senate committee that in order to bring inflation back to the target of 2%, in addition to rising service prices and slowing wage growth, corporate pricing behaviour also needs to be normalized. The CPI growth rate has slowed to around 3% this summer, reaffirming the previous expectation of achieving the target by the end of 2024.
Since March 2022, BOC has decided to raise interest rates by a total of 425bps. In March and April of this year, the policy interest rate has been maintained at 4.5% for two consecutive meetings. At the meetings of the upper and lower committees on the 18th and 20th, global financial turmoil reignited, and the downside risks of facing a more severe economic slowdown and falling commodity prices were also mentioned. However, overall, the risks are balanced. The April meeting minutes released on the 26th (12th) will continue to show concerns about rising prices despite the continuous rise in service prices. However, the Bank of Canada has stated that it has reached the limit level and as long as prices follow the Bank of Canada's outlook, there is a high possibility of fixing at 4.5% within the year.
■The central bank will continue to tighten monetary policy while still paying attention to price fluctuations
In March, Canada's consumer price index (CPI) rose 4.3% year-on-year, and housing loan interest expenses surged. On the other hand, the decline in energy prices and the slowdown in food prices reached the lowest level in one year and seven months. The Bank of Canada (BOC) has emphasized that the core CPI (median and average of adjusted prices) has slowed from its peak in June last year to 4.5%. The unemployment rate remained at a low level of 5.0% in March, and the average hourly wage (for regular employees) remained at a high level of 5.2% year-on-year. On the 20th, Bank of Canada Governor Macklem, President of BOC, stated in a Senate committee that in order to bring inflation back to the target of 2%, in addition to rising service prices and slowing wage growth, corporate pricing behaviour also needs to be normalized. The CPI growth rate has slowed to around 3% this summer, reaffirming the previous expectation of achieving the target by the end of 2024.
Since March 2022, BOC has decided to raise interest rates by a total of 425bps. In March and April of this year, the policy interest rate has been maintained at 4.5% for two consecutive meetings. At the meetings of the upper and lower committees on the 18th and 20th, global financial turmoil reignited, and the downside risks of facing a more severe economic slowdown and falling commodity prices were also mentioned. However, overall, the risks are balanced. The April meeting minutes released on the 26th (12th) will continue to show concerns about rising prices despite the continuous rise in service prices. However, the Bank of Canada has stated that it has reached the limit level and as long as prices follow the Bank of Canada's outlook, there is a high possibility of fixing at 4.5% within the year.