As expected, the Bank of Canada held the line on interest rates Wednesday, keeping its overnight rate steady at 5%.The bank said previous rate hikes were slowly bringing supply and demand back ”into balance” but cautioned there may be further “quantitative tightening” when it meets again in December.“In Canada, there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures. Consumption has been subdued, with softer demand for housing, durable goods and many services. Weaker demand and higher borrowing costs are weighing on business investment.” .In its economic report the bank said the global economy is slowing and growth is forecast to moderate further as past increases in policy rates and the recent surge in global bond yields weigh on demand. The bank is projecting global GDP growth of 2.9% this year, 2.3% in 2024 and 2.6% in 2025. While its global growth outlook is little changed from the July Monetary Policy Report (MPR), the composition has shifted, with the US economy proving stronger and economic activity in China weaker than expected..The bank cautioned further rate hikes may be needed to bring inflation down to 2%.“With clearer signs that monetary policy is moderating spending and relieving price pressures, Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. However, Governing Council is concerned that progress towards price stability is slow and inflationary risks have increased, and is prepared to raise the policy rate further if needed,” it said..After averaging 1% over the past year, economic growth is expected to continue to be weak into the first half of next year before increasing in late 2024 and through 2025. Overall, the bank expects the Canadian economy to grow by 1.2% this year, 0.9% in 2024 and 2.5% in 2025.The near-term weakness in growth reflects both the broadening impact of past increases in interest rates and slower foreign demand, it said. The good news is that higher interest rates are moderating that rate in many goods that people buy on credit — like cars — and this is in turn spreading to services. Food inflation is easing from “very high” rates, it added. But consumers aren’t out of the woods just yet. In addition to elevated mortgage interest costs, rent inflation and other housing costs remain high. Near-term inflation expectations and corporate pricing behaviour are normalizing only gradually, which means wages are still growing around 4% to 5%, which could translate into further rate increases. “The bank’s preferred measures of core inflation show little downward momentum,” it said.