Sharjah24 - AFP: Canada's central bank on Wednesday held its key lending rate at five percent, pointing to a weakening economy harmed by record wildfires over recent months.
"The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures," the Bank of Canada said, adding however that inflation remains relatively high.
The bank hiked rates aggressively over the past year in a bid to bring inflation down to around two percent, from a peak of 8.1 percent in June 2022. In July, average consumer prices rose slightly to yield an inflation rate of 3.3 percent after steadily trending downward.
The bank said its governing council "remains concerned about the persistence of underlying inflationary pressures, and is prepared to increase the policy interest rate further if needed."
It said inflation was expected to be higher in the near term before easing again, while also noting that "there has been little recent downward momentum in underlying inflation."
"It's no surprise that policymakers are hesitant to declare an end to the era of rate hikes," commented Desjardin analyst Royce Mendes in a research note.
A recent string of weak data, he said, reinforces a widespread view among economists that the bank will not raise rates further anytime soon.
RBC Economics's Natahn Janzen agreed, saying he expects the "recent soft-patch in economic data will continue" and the bank to "hold where it is through the end of this year."
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