(Bloomberg) -- The Bank of Canada held interest rates steady and kept the door open to further hikes, with economists seeing its historic tightening cycle at its likely endpoint.Most Read from BloombergIndia’s Moment Has Arrived, and Modi Wants a New Global OrderFed Set to Double Its Economic Growth Forecast After Strong US DataSoaring US Dollar Raises Alarm as China, Japan Escalate FX PushbackChina Slowdown Means It May Never Overtake US Economy, Forecast ShowsHuawei Teardown Shows Chip Breakth
Policymakers led by Governor Tiff Macklem maintained the benchmark overnight lending rate at 5% on Wednesday, the highest level in 22 years. They acknowledged a rapid downshift in the economy and warned that price pressures are proving tough to wrestle all the way back to their target.
While the rate statement suggests policymakers are comfortable waiting to assess how the deteriorating economy will restore price stability, officials are still bothered enough by the persistent momentum in inflation to remain cautious. In a rare public reaction to a monetary policy decision minutes after it was released, Prime Minister Justin Trudeau’s government praised Macklem for holding interest rates steady.
With many central banks globally nearing or at their terminal point for rates, Wednesday’s decision suggests Canada’s six-member panel may soon transition the debate to how long they need to hold instead of how restrictive policy should be. Gross domestic product contracted at a 0.2% annualized rate in the second quarter, far below the bank’s estimate for a 1.5% expansion. The labor market is loosening — job vacancies are falling and the unemployment rate continues to tick up — and the housing market has slowed.
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