The central bank held its key interest rate steady at five per cent last month but kept the door open to more rate hikes, citing concerns about the persistence of underlying price pressures
The Bank of Canada is widely expected to hold its key interest rate steady on Wednesday as the Canadian economy bends to higher interest rates and inflation resumes its downward trend.“Economic data releases since the Bank of Canada opted to forego an interest rate hike in September have been mixed, but we expect that they on net have made a hike at next week’s decision unlikely,” wrote RBC assistant chief economist Nathan Janzen and economist Claire Fan in a client note on Friday.
“We were kind of breathing a sigh of relief a little bit after the last inflation numbers,” said Andrew Grantham, CIBC executive director of economics. The Bank of Canada’s recent business outlook survey supported this expectation. It showed business sentiment continued to weaken in the third quarter as companies said they expect sales growth to slow over the coming year.
These trends are expected to continue as the effect of previous rate hikes take hold on the economy, pinching the pocketbooks of more Canadians and businesses. Most economists expect these weaker economic and tighter financial conditions to eventually bring inflation back down to two per cent. “We’re seeing, globally, the risks around inflation have risen. The conflict in the Middle East, if that escalates, you know, wars are inflationary. There’s no other way around it.,” Grantham said.
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