- The Bank of Canada announced interest rates remain unchanged at 5 per cent after it held its September policy meeting
- The bank said concerns persist about underlying inflationary pressures
- Interest rates could potentially increase again in the future
- Wage growth has also hovered around 4 to 5 per cent
The Bank of Canada kicked off the new school year Wednesday by announcing its interest rates will remain unchanged at 5 per cent.
In a news release after its September policy meeting, the bank said that concerns still linger regarding underlying inflationary pressures and that major banks around the world remain focused on restoring price stability.
“With this pause on increasing interest rates, the Bank of Canada concludes that interest rates seem high enough to bring inflation back down. This means they recognize the early signs of weaknesses in the economy and labour market,” David-Alexandre Brassard, chief economist at CPA Canada, said in a news release. “Interest rates will remain high for a few more months and as they make their way through the economy, more consumers will be faced with higher debt payments.”
Wednesday’s announcement follows the Bank of Canada increasing its policy rate in July by 0.25 per cent. The bank kept the overnight rate at 5 per cent, Bank Rate at 5¼ per cent and the deposit rate at 5 per cent. Inflation rates were 3.3 per cent in July and are expected to hover around 3 per cent for the rest of the year.
“While the bank expects consumer spending to slow in response to the cumulative increase in interest rates, recent retail trade and other data suggest more persistent excess demand in the economy,” the Bank of Canada stated in its news release.
According to the Bank of Canada, the nation’s economy is in a period of weaker growth, while economic growth also slowed in Q2 2023.
“Tightness in the Canadian labour market has continued to ease gradually, but wage growth remains around 4 per cent to 5 per cent,” the bank said. Household growth also slowed as a result of higher rates impacting spending from credit borrowers.
According to a CPA Canada consumer debt survey, it indicated that as high as 33 per cent of indebted Canadians are unsure how rising or falling rates impact their debt.
The Bank of Canada said the next scheduled date for announcing interest rates is slated for Oct. 25.
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