Wednesday afternoon, the Bank of Canada (BoC) released its Summary of Deliberations. The report reflects a more optimistic tone from the central bank of Canada, which could lead to further interest rate increases, especially if high inflationary pressures persist at undesirable levels. Continue reading to learn more about what was discussed at the latest BoC meeting.
Maintaining Interest Rates
According to the October meeting’s report, BoC leaders agreed to be patient and maintain the overnight interest rate at 5.00%. This marked the second consecutive time that the BoC kept rates unchanged.
Objectives of the Bank of Canada
The report indicates that the BoC believes its current policy rate contributes to reducing demand and restoring balance within the Canadian economy. Inflation has moderated this year, while the Canadian economy has been stagnant over the past few quarters.
Future Perspectives
However, some officials have expressed the desire for further rate hikes in the future. Several BoC leaders were of the opinion that interest rates should be raised further to bring inflation back to the BoC’s 2% target. Inflation continues to pose a risk to Canadian households and businesses.
Cautious Approach
BoC leaders have stated that they would like to see whether the current rate is sufficiently restrictive to further reduce demand-related inflation or if additional rate hikes are needed to expedite the process. For now, the BoC appears to be taking a cautious approach.
Next Meeting
The Bank of Canada will hold its next meeting on December 6, its last one for 2023. The markets currently anticipate another rate hold by the BoC, but the economy could change significantly by then.
Conclusion
Time will tell whether the BoC will raise interest rates again. Nevertheless, expect interest rates to remain elevated for an extended period. While rising interest rates may lead to some market volatility, it’s important to hold and diversify your investments, as some securities may be offered at lower prices, potentially increasing long-term returns.
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