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- Bank of Canada keeps trend-setting interest rate steady at 4.5%, marking the first time in over a year that the rate has not been raised.
- The bank is optimistic, but prepared to increase rates if necessary to return to the bank’s two percent inflation target.
Ottawa, Canada: The Bank of Canada‘s Governor Tiff Macklem has announced that the central bank will be holding the trend-setting interest rate steady at 4.5%, marking the first time in over a year that the rate has not been raised. This decision will come as a relief to many borrowers who were expecting yet another hike.
What Led to the Decision?
The bank had previously indicated its leaning toward maintaining the rate, thanks to recent data suggesting that inflation is easing up. The decision also takes into account the fact that Canada’s economy didn’t grow at all in the last quarter of 2022, and both household spending and business investments have started to slow down.
What Does This Mean for Borrowers?
The Bank of Canada’s optimistic outlook should help calm the nerves of homeowners and mortgage holders across the country. Borrowers can breathe a sigh of relief as they will not see an increase in their mortgage rates, making it easier for them to manage their finances.
Is the Bank of Canada Complacent?
While the decision to hold the interest rates steady is a significant one, the Bank of Canada is not complacent. Macklem and his team will continue to keep a close eye on economic developments and the impact of past interest rate increases. If they deem it necessary to return to the bank’s two percent inflation target, they are prepared to increase rates even further.
Challenges Ahead
The Bank of Canada’s decision comes amid concerns over economic growth and the possibility of rising interest rates in the US. The US Federal Reserve has already made it clear that they have no plans to hold the line on interest rates. With the US likely to continue hiking rates, the Bank of Canada could be forced to adjust its plans to defend the Canadian dollar. If they do raise rates, it will hurt the economy in other ways, leaving them stuck between a rock and a hard place.
Conclusion
Despite these challenges, Governor Macklem’s decision is a welcome one for many Canadians. The Bank of Canada has decided to strike a balance between keeping the interest rates steady to support economic growth and keeping an eye on inflation. While this decision may not have been unexpected, it is a significant one that will have a positive impact on borrowers across the country.
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