The Bank of Canada is keeping its key interest rate at 2.25 per cent, saying inflation is close to target, but the economy is still facing challenges.
Governor Tiff Macklem said the rate is positioned to balance inflation control with support for the economy as it undergoes a structural adjustment.
“Given how we see things right now, we think the policy rate is about right … providing a little bit of support to the economy to help it work through this structural adjustment,” Macklem said.
He pointed to stronger‑than‑expected growth in the third quarter and recent job gains, but cautioned that Canada’s economy still has excess supply and growth will remain modest.
“The recent data, as we’ve discussed, is showing some improvement and that is welcome news, but it has not changed our view that the economy is still in excess supply and we continue to expect modest growth going forward,” Macklem said.
Senior Deputy Governor Carolyn Rogers highlighted affordability concerns, noting that households are still struggling with higher costs for essentials such as food and shelter.
“The CPI measures the rate of growth of prices. It doesn’t measure the level change in prices that has happened … and Canadians are still feeling that,” Rogers said.
The Bank’s release said consumer price inflation slowed to 2.2 per cent in October, with core measures between 2.5 and 3 per cent.
Officials expect trade volatility to weigh on GDP in the fourth quarter, even as domestic demand shows signs of improvement.
Macklem added that monetary policy cannot restore lost supply but can help the economy adjust as long as inflation is controlled.
“Our priority is to maintain confidence in price stability during this period of global upheaval,” Macklem said.
