Bank Of Canada Hikes Rates, Becomes First Major Central Bank To Signal Pause  

 

• The Bank of Canada on Wednesday hiked its key interest rate to 4.5%, the highest level in 15 years, and became the first major central bank fighting global inflation to say it would likely hold off on further increases for now. The 25-basis-point rise matched analysts' expectations. The bank has lifted rates at a record pace of 425 basis points in 10 months to tame inflation, which peaked at 8.1% and slowed to 6.3% in December, still more than three times the 2% target. 
• "We are turning the corner on inflation," Bank of Canada Governor Tiff Macklem told reporters. "We are still a long way from our target, but recent developments have reinforced our confidence that inflation is coming down."
• Macklem said the bank wanted to take time to see how effective the rapid hikes had been in dampening excess demand and hot labour markets that have fueled inflation. "To be clear, this is a conditional pause," he said, noting there were upside risks to the outlook.
• In its quarterly Monetary Policy Report (MPR), which includes new forecasts, the bank painted a picture of an economy that is going to stall and could tip into a recession during the first half of the year, bringing inflation down to about 3% at mid-year and back to 2% in 2024. The Canadian dollar was trading 0.3% lower at 1.3410 per greenback, or 74.57 U.S. cents. The 2-year yield eased nearly 6 basis points to 3.596%.

(Source: Reuters)