In a move that surprised absolutely no one except perhaps those living under a rock without Wi-Fi, the Bank of Canada has decided to hold its key interest rate steady at a thoroughly unparty-like five percent. The central bank’s announcement on Wednesday marked the fifth time in a row it has opted to do, well, nothing, staying perched on the fiscal fence while the rest of us grit our teeth every time we glance at a mortgage renewal notice.
This decision comes after a two-day deliberation session that likely involved a fair amount of coffee and cautious optimism, as the economic scribes at the Bank try to thread the needle between inflation that refuses to take the hint and an economy that appears to be slowing down, though not so fast that anyone can call it a proper nap.
After hiking rates ten times since March 2022 in a dramatic show of anti-inflationary zeal, the Bank now seems quite content keeping its powder dry, allowing the existing high rates to marinate a little longer in the stew of economic impacts. The bank noted it is seeing “clearer signs that monetary policy is working” which is central-bank speak for “we’re doing okay, please stop yelling at us.”
The Consumer Price Index, that beloved barometer of all things grocery and gasoline, cooled to 2.8 percent in February, which economists describe as “within striking distance” of the two percent target. The Bank, ever the reluctant optimist, called this a good sign but was quick to point out that inflation could still nose its way back up thanks to sticky service costs and other unruly variables refusing to behave like tidy equations in an economics textbook.
Meanwhile, the overall economy is doing its best impression of a moderately sleepy Labrador retriever. Growth remains soft, consumer spending is tepid but not dead, and employment numbers continue to flout gravity. Unfortunately for the dreamers, this is not yet enough for the Bank to start cutting interest rates like it’s 2009 again.
“The Council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed,” the Bank said, in its classically understated tone beloved by economists and loathed by borrowers.
Markets are now breathlessly speculating about when the Bank might finally blink and start cutting rates. Some have their money on June, others prefer July, and a few have gone so far as to predict multiple cuts before the year is out. As always, economists remain united in their belief that someone is probably wrong.
For now, the five percent rate holds firm, peering down at prospective homebuyers like a stern librarian watching kids near the rare books section. Do not touch, not yet.
Because nothing says excitement quite like holding steady.