Farmers Forum staff
OTTAWA — As it attempts to wrestle down domestic inflation stoked in part by Trudeau government policies, the Bank of Canada boosted its key overnight lending rate another quarter point to 4.5 % on Jan. 25. But the independent Conference Board of Canada foresees no further interest-rate increases — after the central bank’s eighth consecutive hike in a year — given the outlook for both declining inflation and a weakening economy in 2023.
The Conference Board expects the Bank of Canada will hit its targeted annual inflation rate of 2 % by December 2023. Inflation stood at 6.3 % in December 2022, down from a high of 8.1 % in June as a series of interest rate hikes began to bite the economy. Food inflation in December 2022, however, outstripped the overall inflation rate that month and remained in double digits, at 11%
The most recent interest-rate hike also translates into a bank rate of 4.75 % and a deposit rate of 4.5 %. Last year at this time, the overnight rate was just 0.25 %.
Rates have gone up 16-fold since March 2022.
The Conference Board does see some potential obstacles that could put upward pressure on Canadian inflation despite the central bank’s best efforts. They include a resurgent Chinese economy with the end of lockdown measures in that country and a looming debt-ceiling battle in the U.S. congress.