The Bank of Canada on Wednesday left its key overnight interest rate on hold at 4.50%, as expected, becoming the first major central bank to suspend its monetary tightening campaign in the face of an anticipated easing of high inflation.
"It certainly sounds like the bank is on hold," said Doug Porter, chief economist at BMO Capital Markets. "We're expecting them to stay on hold through the rest of this year."
Before the BoC's policy announcement, money markets were fully pricing in another tightening by September. They trimmed their bets to a 90% chance for a September hike after the decision. In its statement, the central bank acknowledged that fourth-quarter growth was below its expectations, and dropped language saying the economy was in "excess demand," language that was used twice when it announced the January rate hike.
The central bank said core inflation measures and short-term inflation expectations still needed to fall in order to return inflation to target. The BoC expects near-zero growth for the first three quarters of 2023.
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