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Bank of Canada Likely to Hold Interest Rates

Bank of Canada Likely to Hold Interest Rates

The Bank of Canada (BoC) is anticipated to maintain its rates at a 22-year high of 5% this Wednesday. Analysts foresee this decision given the recent contraction in growth during the third quarter and the projected slump in the upcoming year.

Key Highlights:

  • Bank of Canada expected to maintain rates at 5% amid economic slowdown predictions.
  • Analysts foresee potential growth slump following a 1.1% contraction in the third quarter.
  • Anticipated impact of upcoming mortgage renewals on the economy’s growth trajectory.
  • Inflation slightly eased to 3.1% in October but remains above the 2% target.
  • Speculations hint at a possible rate cut in March despite BoC’s stance against it.
  • BoC’s Governor Macklem hints at a potential peak in interest rates amidst weakening growth.

Economic Contraction and Bank of Canada Projections

Following consecutive quarter-point rate hikes in June and July, the central bank has kept rates steady. However, with the economy contracting by 1.1% annually in the third quarter, concerns arise despite narrowly avoiding a recession. Analysts predict that impending mortgage renewals, now at higher rates, might further impede growth in the coming year.

October witnessed a slight ease in inflation, dropping to 3.1%, although remaining above the bank’s 2% target. Desjardins Group economists Royce Mendes and Tiago Figueiredo affirm that maintaining the policy rate at 5% is highly probable this week, emphasizing the anticipated impact of mortgage renewals on the economy.

Implications and Bank of Canada Statements

Speculations arise about a potential shift in the BoC’s stance, with Deputy Governor Toni Gravelle scheduled to provide insights into the bank’s decision-making process in a news conference on Thursday.

Governor Macklem hinted at a probable plateau in interest rates, given the disappearance of excess demand and the anticipation of prolonged weak growth.

Read More: Private Sector Jobs Reached 103,000 in November

Market Speculations and Analyst Insights

Market speculations hint at a plausible rate cut as early as March, though Macklem has indicated the absence of contemplation about cuts due to persistent inflation above the target rate.

Douglas Porter, chief economist at BMO Capital Markets, echoes a hawkish sentiment, emphasizing the possibility of rate hikes versus cuts, despite concerns about potential inflationary pressures affecting the 2024 economic outlook.

Anticipated Bank of Canada Decision

The Bank of Canada’s forthcoming decision, scheduled for 10 am ET (1500 GMT), carries substantial weight within the economic sphere. Analysts are eager to gauge the potential measures the bank might take to counter the projected slowdown, particularly in light of prevailing inflation and growth concerns.

The expected maintenance of the 5% rate by the Bank of Canada indicates a cautious approach toward economic stabilization. With the potential impact of mortgage renewals and inflationary pressures looming, stakeholders await clarity from the central bank regarding its strategy to navigate the anticipated economic challenges.

Read More: UK Construction Sector Declines in November-PMI Drops Below Growth Threshold


As the BoC gears up to announce its decision, the anticipation within financial circles is palpable. The economic trajectory of Canada hinges on the bank’s measures in response to the forecasted slowdown, underscoring the significance of this impending announcement.

Stay tuned for updates as the Bank of Canada’s decision unfolds and shapes the trajectory of the nation’s economic landscape.


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