Daily Spotlight: Bank of Canada Maintains Target Rate

Summary

In early March, the Bank of Canada maintained its target overnight interest rate at 5.00% after similar moves in September and December, with the central bank noting that it “remains resolute in its commitment to restoring price stability for Canadians.” Consumer price inflation in Canada decelerated to 2.9% in January, but has stayed above the central bank’s 2% target — with the shelter component remaining elevated (due to a housing shortage and higher interest rates) and the biggest contributor to the overall figure. The central bank now sees price inflation staying near 3% until mid-2024, before gradually easing. Meanwhile, Canada’s GDP grew by a sluggish 1% in 4Q (after contracting by 0.5% in 3Q), which the central bank described as “below potential.” A majority of Canadian economists had been forecasting that the central bank would start cutting interest rates in June, but that has now shifted to July. We believe that select companies in our Canadian coverage continue to offer investment opportunities.

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