Bank of Canada Releases Summary Of Deliberations

On March 20th, the Bank of Canada’s Governing Council released its summary of deliberations, leading to its The decision will be made on the 6th of March 2024.. This summary explains why the policy rate was kept at 5%. The council studied the international economy, focusing on the United States as well as the Eurozone and China. They also analyzed the implications of the global economy for the Canadian economy. 

The decision was based upon various factors. Below is an overview that has been simplified. Bank of Canada Summary of DeliberationsPlease contact us for more information and a detailed explanation of your decision.

International Economy

The Governing Body began by discussing recent global data from the January Monetary Policy Report. The growth in most regions has slowed, but the United States has shown resilience, with a slower, yet robust, economic activity, driven largely by consumer spending and government assistance. Eurozone faced challenges, with a barely positive growth rate due to weak consumer sentiment and tighter monetary policies. China’s growth slowed down as expected, especially due to investment, particularly in the property sector. The United States as well as the Eurozone saw their inflation ease due to improved supply conditions, and a decrease in core inflation.

Canadian Economy and Inflation Outlook

Council members reviewed Canadian economic data, noting higher-than-projected GDP growth driven by exports but still below potential. Domestic demand fell with modest growth in consumption and reduced business investments. Despite some bounce-back in growth in January, concerns persisted about the first quarter’s growth outlook. Export growth was partly due to the continued US demand, and changes in reporting methods. The rate of employment growth has slowed down, with signs that wage pressures are easing. The housing market dynamics remain a source of concern and could contribute to inflationary pressures. Inflation indicators showed slow progress toward target levels.

Considerations of Monetary Policy

Members of the Council stressed the importance of sustained progress on underlying inflation. In terms of balancing demand and supply, monetary policy appeared to be working as anticipated. However, higher interest rates were slowing the economic growth. The high wage growth in comparison to productivity has raised concerns about inflationary pressures. However, signs of wage growth moderating have been noted. No updates were provided on corporate pricing or inflation expectations. However, these indicators are considered vital for future decisions. Discussions were held on the risks to economic growth and inflation. These included the persistence of inflation and its impact on consumer spending. The risks of rate changes being made too early versus too late were weighed.

The Governing Council, in light of these complex deliberations, decided to maintain the policy interest rate at 5%. They acknowledged the need for more time to restore the price stability, while judiciously weighing up the risks associated premature rate adjustments.

The Bank of Canada’s decision to maintain the policy rate appears to reflect a cautious approach aimed at restoring stability amidst evolving global and domestic economic conditions.