With the economy downshifting to a lower gear, the Bank of Canada shifted focus at their January monetary policy announcement. The central bank held rates steady and, acknowledging slower growth and some improvement in inflation, said it has shifted from discussing whether the policy rate is restrictive enough to restore price stability, to how long it needs to stay at the current level.
The Bank of Canada (BoC) held its policy rate at 5.00% at its October announcement, and maintained a moderate tightening bias. However, we believe the BoC's interest rate pause will be an interest rate peak. Given we forecast slower growth and inflation than the central bank, we expect policy rate to hold steady for an extended period, before rate cuts begin in Q2-2024.