The Bank of Canada Remains Committed to the Inflation Target and Holds Rates

On Wednesday, The Bank of Canada decided to maintain its target interest rate while emphasizing its commitment to achieving a 2% inflation target. The overnight rate remains at 5%, the bank rate at 5.25% and the deposit rate at 5%. The Bank of Canada is also continuing its policy of quantitative tightening. Inflation in advanced economies is decreasing, but core inflation remains high, leading major central banks to prioritize price stability. Global growth has slowed, primarily due to China’s economic slowdown and issues in its property sector. The U.S. experienced stronger-than-expected growth, driven by robust consumer spending, while Europe saw growth in the service sector but a contraction in manufacturing. Global bond yields have risen, reflecting higher real interest rates, and international oil prices are higher than anticipated.

Canada’s economy is facing weaker growth, which is seen as necessary to alleviate inflationary pressures. Economic growth slowed in the second quarter of 2023 due to reduced consumption, declining housing activity, wildfires and the impact of higher interest rates. Household credit growth also slowed due to higher rates restraining spending. Recent data shows widespread inflationary pressures, with CPI inflation averaging around 3%. Core inflation measures indicate little downward momentum. The Bank of Canada is concerned about persistent inflation but maintains the policy interest rate at 5%, with the option to raise it further if necessary. They will continue to assess factors like inflation expectations and wage growth to achieve its 2% inflation target. The Bank of Canada remains committed to restoring price stability for Canadians.

In a speech this afternoon to the Calgary Chamber of Commerce, Governor Tiff Macklem explained the Bank of Canada’s emphasis on the importance of the 2% inflation target, which has been the cornerstone of monetary policy since 1995. Members argue against changing the target or accepting higher inflation, stating that maintaining it provides stability and confidence to households and businesses. They discuss the ongoing balance between supply and demand in the economy and express concern about the persistence of inflationary pressures.

The labor market is closely monitored, with signs of cooling labor demand allowing supply to catch up, although wage growth remains high.

Governor Macklem also highlighted the Bank of Canada’s need to review its monetary policy framework, including the 2% inflation target, every five years to ensure it remains suitable for the evolving economic landscape. He stressed that this framework has served Canada well, providing low and stable inflation and supporting economic performance.

In conclusion, the Bank of Canada reiterates its dedication to achieving the 2% inflation target. It acknowledges the challenges of higher interest rates while emphasizing the importance of price stability for Canadians’ well-being. They remain vigilant in assessing the economy and stand ready to take further action, if required, to achieve their policy goals.


Important Information:

Warren Gerow is an independent investment wealth consultant to Sightline

Wealth Management.

Sightline Wealth Management LP (“Sightline”) is an investment dealer and

is a member of the Investment Industry Regulatory Organization of Canada

(IIROC) and the Canadian Investor Protection Fund (CIPF). Sightline provides

management and investment advisory services to high-net-worth individuals and

institutional investors.

Sightline Wealth Management LP is a wholly owned subsidiary of Ninepoint

Financial Group Inc. (“NFG Inc.”). NFG Inc. is also the parent company of

Ninepoint Partners LP, it is an investment fund manager and advisor and exempt

market dealer. By virtue of the same parent company, Sightline is affiliated

with Ninepoint Partners LP. Information and/or materials contained herein is

for information purposes only and does not constitute an offer to sell or

solicitation to purchase securities of any issuer or any portfolio managed by

Sightline Wealth Management or Ninepoint Partners, including Ninepoint managed


The opinions and information contained in this article are those of

Sightline Wealth Management (“Sightline”) as of the date of this article and

are subject to change without notice. Sightline endeavors to ensure that the

content has been compiled from sources that we believe to be reliable. The

information is not meant to be used as the primary basis of investment

decisions and should not be constructed as advice. Each investor should obtain

independent advice before making any investment decisions.

To contact Sightline and request a full Smart Money Market Report, fill out the contact form below

CALL US AT 866.889.1909

Please note we only serve clients who reside in Canada.
I would like to receive ongoing news and information from Sightline Wealth Management

Recent Articles