economy news bulletin news
By Michel Comte
Canada’s central bank on Wednesday held its key lending rate at five percent, pointing to a weakening economy harmed by record wildfires over recent months. bulletin news
“The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures,” the Bank of Canada said, adding however that inflation remains relatively high.
The bank hiked rates aggressively over the past year in a bid to bring inflation down to around two percent, from a peak of 8.1 percent in June 2022. In July, average consumer prices rose slightly to yield an inflation rate of 3.3 percent after steadily trending downward.
The bank said its governing council “remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed.”
It said inflation was expected to be higher in the near term before easing again, while also noting that “there has been little recent downward momentum in underlying inflation.”
“It’s no surprise that policymakers are hesitant to declare an end to the era of rate hikes,” commented Desjardin analyst Royce Mendes in a research note.
A recent string of weak data, he said, reinforces a widespread view among economists that the bank will not raise rates further anytime soon.
RBC Economics’s Natahn Janzen agreed, saying he expects the “recent soft-patch in economic data will continue” and the bank to “hold where it is through the end of this year.”
Pleas for lower rates
The Bank of Canada noted in its report that economic growth slowed sharply in the second quarter, with output contracting at an annualized rate of 0.2 percent.
“This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country,” it said.
The labor market has continued to gradually ease, it added, but wage growth has remained at around four to five percent.
The ruling Liberals have faced a barrage of criticisms from opposition parties over soaring costs of living, compounded by rising rates, and now trail the Conservatives in public opinion polls.
Jagmeet Singh, the leader of a small leftist faction propping up the minority government, called for the Liberals to review the bank’s inflation-busting mandate to also include consideration of the impacts of rate hikes on Canadians’ pocketbooks.
“High interest rates hurt Canadians,” Singh said at a caucus meeting ahead of the return of Parliament after a summer break. “It’s time to say enough is enough.”
Provincial leaders of British Columbia and Ontario in the past week also pleaded with the bank not to raise rates further, saying it would cause hardship for homeowners set to renew mortgages at higher rates and those struggling to buy in a tight housing market.
Finance Minister Chrystia Freeland said in a statement the bank’s decision not to hike rates on Wednesday was “welcome relief for Canadians.”
She did not comment on the bank’s mandate, but vowed to “use all the tools at my disposal, and to work with partners at other levels of government across Canada, to ensure that interest rates can come down as soon as possible.”
amc/dw
© Agence France-Presse. All rights are reserved.
economy news bulletin news
