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The Bank of Canada announced that it would hold its overnight rate at 5%, with the Bank Rate at 5.25% and the deposit rate at 5% on Wednesday.

The announcement marks the fifth consecutive decision to keep the rate steady at 5% since July 2023 as the central bank continues its policy of quantitative tightening. 

“In Canada, the economy grew in the fourth quarter by more than expected, although the pace remained weak and below potential. Real GDP expanded by 1% after contracting 0.5% in the third quarter,” reads a Bank of Canada statement released on Wednesday.

“Consumption was up a modest 1%, and final domestic demand contracted with a large decline in business investment. A strong increase in exports boosted growth.” 

The central bank noted that while employment continues to grow, it has yet to surpass the booming population growth spurred by immigration. 

The Consumer Price Index revealed that inflation eased to 2.9% in January, however, the biggest contributor to inflation, shelter price, continued to elevate.

“Underlying inflationary pressures persist: year-over-year and three-month measures of core inflation are in the 3% to 3.5% range, and the share of CPI components growing above 3% declined but is still above the historical average,” reads the statement.

The Bank of Canada expects that inflation will hover around 3% for the first six months of 2024, before gradually coming back down. 

“Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour,” added the statement. 

The next scheduled announcement for the Bank of Canada’s overnight rate target is scheduled for April 10, 2024.