Bank of Canada announces July rate decision
Central bank delivers expected call despite inflation concern
Canada’s annual inflation rate ticked up to 3.2% in May, the first time in nearly two and a half years it surpassed the central bank’s 3% upper target, in a development that might normally have boosted the odds of a rate hike.
But Bank decisionmakers have maintained a wait-and-see approach to interest rates throughout the year to date amid a sluggish economy and continued uncertainty caused by the US-Israel war in Iran – meaning few observers expected anything other than a rate hold in today’s decision.
In a Canadian Mortgage Professional poll of mortgage industry members this week, 91% of respondents said they anticipated no change, with just 4% forecasting a rate hike and 4% expecting a cut.
Meanwhile, a Reuters survey of economists showed all 36 respondents expected a July hold, while a majority also said the next 12 months will likely see no further change.
A rise in gasoline prices sparked the latest inflation uptick – and while prices at the pump have since moderated, a fresh escalation in the war in Iran has raised questions over whether a further inflation shock is ahead.
