The Bank of Canada (BoC) is leaving the overnight interest rate at 4.5%.

This comes at time when the local economy is still growing quickly with demand exceeding supply. As such, the BoC doesn’t want this to push inflation up further.

Currently, inflation is at 5.2%, a decrease from last June when the rate peaked at 8.1%. The BoC says it expects “inflation to fall quickly to around 3% in the middle of this year and then decline more gradually to the 2% target by the end of 2024.”

Food inflation is still around 10%, but BoC Governor, Tiff Macklem says it should start coming down “in the months ahead because production and distribution costs have eased”. 

When asked whether an interest rate cut was something Canadians could expect this year, Governor Macklem cautioned that the central bank is prepared to raise interest rates if inflation doesn’t come down to the Bank’s 2% target.

The BoC’s next rate announcement will be June 7. Commenting on the move to hold the rate steady, Scotiabank’s Senior Vice President and Chief Economist, Jean-François Perrault lamented that Canadians shouldn’t expect to see an interest rate cut until early next year.

According to him, “We’re still of a mind that the recession is going to start in the second quarter [of 2023]. That is to say a very small decline in economic activity.”