The Bank of Canada has held its target for the benchmark interest rate at 4.5 percent.
In a statement on Wednesday, the central bank said that its governing council continues to assess whether monetary policy is sufficiently restrictive to relieve price pressures and remains prepared to raise the policy rate further if needed to return inflation to the 2 percent target, Xinhua news agency.
The bank said it is also continuing its policy of quantitative tightening to complement its restrictive stance.
According to the bank, Canada’s CPI inflation eased to 5.2 percent in February and its preferred measures of core inflation were just under 5 percent.
The Bank of Canada said it expects CPI inflation to fall quickly to around 3 percent in the middle of this year and then decline more gradually to the 2 percent target by the end of 2024.
However, getting inflation the rest of the way back to 2 percent could prove to be more difficult because inflation expectations are coming down slowly, service price inflation and wage growth remain elevated, and corporate pricing behavior has yet to normalize, the bank said.
Economic growth in the first quarter looks to be stronger than was projected in January, with a bounce in exports and solid consumption growth. It is projected to be weak through the remainder of this year before strengthening gradually next year, it added.
According to the central bank, Canada’s economy is projected to grow by 1.4 percent this year and 1.3 percent in 2024 before picking up to 2.5 percent in 2025.