Bank of China policy interest rates remain unchanged temporarily
2023-04-13
■The Bank of Canada has suspended interest rate hikes but retains the option of further rate hikes in the future
■Concerns about the financial system, with speculation of interest rate cuts within the year, but temporarily maintaining monetary tightening
The Bank of Canada (BOC) decided on March 8th to stop raising interest rates and maintain the policy rate at 4.5%. In the meeting minutes released on March 22nd, all five policy commissioners agreed to evaluate the impact of the 4.25% interest rate hike in the past year on the economy, taking into account the expected economic slowdown and price decline. However, due to the continuous rise of service prices and the risk that the consumer price index (CPI) growth rate remains high, BOC still retains the option of further interest rate increases.
BOC predicts that future financial policies will continue to impose restrictions on household spending, and economic growth will be weak in the coming quarters, with growth in the first quarter likely dropping to near zero. On March 29, Gravelle, Vice President of BOC, said: "If the banking system is in a serious state of tension, we are ready to provide liquidity support." If the Canadian treasury bond market is in a serious failure, the Central Bank will also consider large-scale bond purchases from financial institutions. However, this threshold is very high and there is currently no level of concern about the health of the financial system.
The Bank of Canada expects the year-on-year CPI growth rate to be 5.2% in February, which has slowed down from the peak of 8.1% in June last year and may drop to nearly 3.0% by the end of the year. Against the backdrop of unease in the European and American financial systems, there have been predictions of central bank interest rate cuts this year, but the year-on-year increase rate of core CPI is 4.7%, higher than the central bank's target range (1-3%), and the labor market is still tense. Therefore, the central bank's meeting is likely to maintain policy interest rates at a high level for about 15 years. The central bank will consider the released financial policy report and March CPI data to determine the policy direction after June.