North Bay and Area REALTORS® Association

Bank of Canada pauses interest rate hikes but continues quantitative tightening

After eight successive rate hikes the Bank of Canada has decided to maintain its target for the overnight lending rate at 4.5%, while continuing its policy of quantitative tightening.

The Bank indicated global economic developments have evolved in line with their expectations amidst a backdrop of slowing global growth and easing inflationary pressures. However, China’s economic recovery along with the Russia-Ukraine war were cited as key sources of upside risk. According to the Bank, overall financial conditions have tightened in recent months along with the Canadian dollar losing value against its U.S. counterpart.

According to the Bank, fourth quarter economic growth in Canada was flat and came in below expectations, due mainly to a falloff in inventory investment. The Bank added that tight monetary policy continues to weigh on household spending and business investment amidst slowing domestic and foreign demand. Notwithstanding, the labour market remains vibrant as evidenced by strong job gains, historically low unemployment, increased job vacancies, and wage growth in the range of 4-5%.

Inflation eased to 5.9% in January, driven mainly by lower prices for energy, durable goods, and some services. The Bank acknowledged the hardships being faced by many Canadians, as food and shelter costs continue to rise. According to the Bank, price pressures, particularly in the product and labour markets, are expected to ease in line with weak economic growth over the next few quarters, leading to a moderation in wage growth and increased price competition among firms.

Overall, the Bank is of the view that recent data is in line with their expectation for Consumer Price Index inflation to fall to 3% by the middle of this year. Looking ahead, the Bank noted it will continue to assess economic conditions and is prepared to resume raising rates if necessary to return inflation to its 2% target.

The Bank of Canada’s next scheduled interest rate announcement will be on April 12, 2023, at which time it will publish its next Monetary Policy Report.


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