Bank of Canada Takes March Break from Raising Interest Rates

The Bank of Canada has decided to take a break from raising interest rates in March, a decision that could have major implications for the Canadian economy. Statistics Canada’s consumer price index rose 5.9 per cent in January from a year earlier, indicating that the worst inflation outbreak since the 1980s might be over. This news has prompted Bank of Canada governor Tiff Macklem to pause and assess whether he had done enough to curb price pressures.

The Bank of Canada’s Actions

The Bank of Canada raised the benchmark rate a quarter-point in January while also promising to hold it there, provided incoming data showed inflation was moving back to its target of two per cent. This aggressive stance has been taken in order to keep expectations of higher prices from becoming entrenched. Inflation is still too high, and Macklem has made it clear that he’s willing to risk a mild recession this year if that’s what it takes to keep inflation in check.

Inflation in the US

Last week, evidence emerged that inflation in the United States was hotter than anticipated at the start of the year, raising questions about whether the story would be similar in Canada. However, the latest numbers from Statistics Canada suggest inflation continues to drift lower, much as the Bank of Canada said it would in January.

Mortgage Interest Costs

The new inflation numbers also showed that mortgage interest costs increased some 21 per cent in January from a year earlier, the biggest increase since the fall of 1982, Statistics Canada said. This is a risk that the Bank of Canada has acknowledged, as households have piled up debt chasing runaway housing prices over the past decade. As a result, Macklem has stressed the importance of Canadians seeing that inflation keeps coming down in order to restore their confidence in the Bank of Canada.

Related Facts

• The Bank of Canada raised the benchmark rate a quarter-point in January.
• Statistics Canada’s consumer price index rose 5.9 per cent in January from a year earlier.
• Mortgage interest costs increased some 21 per cent in January from a year earlier.
• The Bank of Canada is willing to risk a mild recession this year if that’s what it takes to keep inflation in check.

Key Takeaway

The Bank of Canada has decided to take a break from raising interest rates in March, a decision that could have major implications for the Canadian economy. Statistics Canada’s consumer price index rose 5.9 per cent in January from a year earlier, indicating that the worst inflation outbreak since the 1980s might be over. This news has prompted Bank of Canada governor Tiff Macklem to pause and assess whether he had done enough to curb price pressures.

Conclusion

The Bank of Canada’s decision to take a break from raising interest rates in March is a positive sign for the Canadian economy. Despite the fact that inflation is still too high, the latest numbers from Statistics Canada suggest that inflation continues to drift lower. This news signals that the Bank of Canada’s aggressive stance in terms of raising interest rates has had a positive impact on inflation, and that Canadians can have confidence in the Bank of Canada’s ability to keep inflation in check.