BoC raises overnight rate by 25bps to 5.00% as widely expected. Correspondingly, the Bank Rate and deposit rate are increased to 5.25% and 5.00% respectively. In the new economic projections, both GDP and CPI forecasts for 2023 are upgraded.
Nevertheless, the central bank didn’t explicitly state a tightening bias in the statement. But the Governing Council will “continue to assess the dynamics of core inflation and the outlook for CPI inflation”, and ” remains resolute in its commitment to restoring price stability”.
BoC said that “Canada’s economy has been stronger than expected, with more momentum in demand”. In the new economic projections, GDP is forecast to grow 1.8% in 2023 (raised from 1.4%), 1.2% in 2024 (lowered form 1.3%0, and then 2.4% in 2025 (lowered from 2.5%).
CPI is projected to have a “slower return to target than was forecast in the January and April projections”. CPI is projected to slow to 3.7% in 2023 (raised from 3.5%), then 2.5% in 2024 (raised from 2.3%), and then 2.1% in 2025 (unchanged).
