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Bank of Canada announcement March 6th 2024

Bank of Canada announcement today

As anticipated, the Bank of Canada (BoC) decided to maintain its key rate at 5.0%, matching its decision at the January 24 gathering. In its policy statement, the BoC reiterated it needs to see further progress in core consumer prices – even as the Consumer Price Index (CPI) came in at 2.9% in January. It also reiterated its pledge to continue its policy of quantitative tightening.

A summarize the Bank’s comments below. 

Canadian inflation

  • Shelter-price inflation remains elevated “and is the biggest contributor to inflation”
  • 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 

Canadian economic performance and employment

  • The Canadian economy grew in the fourth quarter by more than the BoC expected, “although the pace remained weak and below potential” 
  • Real GDP expanded by 1% after contracting 0.5% in the third quarter
  • 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
  • Employment continues to grow more slowly than the population, and there are now some signs that wage pressures may be easing
  • Overall, the data point to “an economy in modest excess supply”

Global economic performance and bond yields

  • Global economic growth slowed in the fourth quarter of 2023 
  • U.S. GDP growth also slowed but remained “surprisingly robust and broad-based,” with solid contributions from consumption and exports
  • Euro area economic growth was flat at the end of the year after contracting in the third quarter
  • Inflation in the U.S. and the Euro area continued to ease
  • Bond yields have increased since January while corporate credit spreads have narrowed
  • Equity markets have risen sharply
  • Global oil prices are slightly higher than what was assumed in the January Monetary Policy Report (MPR)

Outlook

The Bank’s statement this month was relatively short and its forward-looking comments limited, except its observation that it expects inflation to “remain close to 3% during the first half of the year before gradually easing.” However, it noted that its Governing Council is still concerned about risks to the outlook for inflation, particularly “the persistence in underlying inflation.” Governing Council wants to see “further and sustained easing” in core inflation and said it continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. 

Once again, the Bank repeated its mantra that it remains “resolute” in its commitment to restoring price stability for Canadians. So for the timing being, the policy rate will remain at 5.0% where it’s been since July of 2023.

Next Touchpoint

On April 10, 2024, the Bank of Canada returns with another interest rate announcement including updated economic commentary.  First National will provide an executive summary immediately following. For other capital market insights in between, please visit the Resources page of our website. 

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