Bank of Canada Keeps Interest Rates Steady

The Bank of Canada decided not to change its interest rates, currently at 5%. They're also continuing their plan to reduce the amount of money in circulation.


World Economy: Slower Growth

Around the world, economies are slowing down. This is because interest rates have increased, and global bond yields have increased, making people and businesses spend less. The Bank predicts the world's economy will grow by 2.9% this year, 2.3% in 2024, and 2.6% in 2025. The U.S. is doing well, but China is struggling, and Europe is slowing down, too. Prices for things we buy are not going up as fast as before because supply problems are getting solved, and people are buying less. However, central banks are still watching prices closely. Also, oil prices are higher, and some trouble in Israel and Gaza is making things uncertain.


Canada's Economy: Feeling the Effects

In Canada, the higher interest rates from before are affecting our economy. People are spending less on houses, big purchases, and services. Businesses are also investing less because borrowing money is more expensive. Even though more people are coming to Canada, there are fewer job openings. However, the job market is still tight, and wages are increasing. Overall, Canada's supply and demand for goods and services are getting more balanced.


What's Next for Canada?

The following year might not grow much because of the earlier interest rate hikes and less demand from other countries. But in late 2024 and beyond, things should get better. People will likely spend more, and businesses will invest more because other countries want to buy our stuff. The government is also spending money, which helps the economy. The Bank thinks that this year, Canada's economy will grow by 1.2%, and in 2024, it will grow by 0.9%. But in 2025, it should pick up and increase by 2.5%.


Prices: Up and Down

Lately, prices have been up and down. Some months, they've gone up a lot, and others, not so much. Higher interest rates are helping to slow down the prices of things we buy with credit. Food prices are starting to go down from very high levels. But rent and housing costs are still high. People expect prices to stay pretty high, and wages are still increasing by 4% to 5%. The Bank is keeping an eye on this.


The Bank's Plan

The Bank is doing things to slow down spending and lower prices. They've decided to keep interest rates the same and do what they do with money. But they're worried because things are not getting stable quickly, and prices might keep going up. They should raise interest rates more. The Bank is watching fees, what people expect prices to do, how much people are paid, and how companies set their prices. They're serious about getting prices stable for Canadians.


Important Dates

The next time the Bank will talk about interest rates is December 6, 2023. They'll give a more detailed report on the economy and prices on January 24, 2024.

Posted by Maryann Jones on


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