BoC raises overnight rate by 25bps to 4.50% as widely expected. The Bank Rate and deposit rate are also lifted to 4.75% and 4.50% respectively.
In the statement, BoC said, “If economic developments evolve broadly in line with the MPR outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases.”
That is, a pause is going to follow. But, BoC is still “prepared to increase the policy rate further if needed to return inflation to the 2% target.”
BoC also noted, that recent economic growth has been “stronger than expected” with the economy remains in “excess demand” Labor markets are “still tight”. But there is “growing evidence that restrictive monetary is slowing activity”. It expects the effects of tightening to “continue to work through the economy” while weaker foreign demand will weigh on exports.
BoC projects growth of about 1% in 2023 and 2% in 2024. Inflation is projected to fall to around 3% in the middle of 2023, and then 2% in 2024.
