The Bank of Canada held its overnight rate at 5% on Wednesday. The Bank is “continuing its policy of quantitative tightening,” it said in a statement, adding though the economy grew more in the fourth quarter than expected, “the pace remained weak and below potential.”“Real GDP expanded by 1% after contracting 0.5% in the third quarter. Consumption was up a modest 1%, and final domestic demand contracted with a large decline in business investment.”The Bank noted there was a strong increase in exports, which boosted the economy’s growth, but “employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing.”“CPI inflation eased to 2.9% in January, as goods price inflation moderated further, while shelter price inflation remained elevated and is the biggest contributor to inflation,” said the bank. “Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average.”The bank expects inflation will remain “close to 3% during the first half of this year before gradually easing.”Governing Council is “still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation,” and “wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour,” wrote bankers. “The Bank remains resolute in its commitment to restoring price stability for Canadians.”
