In its rate statement, the bank said that while the Canadian economy continues to operate in excess demand, the effects of higher borrowing costs are becoming evident in interest-sensitive areas. “Economic growth is expected to stall through the end of this year and the first half of next year as the effects of higher interest rates spread.”
It cut its gross domestic product forecast for 2023 by half to 0.9% and predicted economic growth will decelerate to an annualized 0.5% pace in the fourth quarter of this year
While the country’s annual inflation rate dipped slightly in September to 6.9%, thanks in large part to a decline in gasoline prices, the cost of groceries continues to climb. Analysts expect another interest rate hike in December before the central bank hits pause to assess the impact.
The Bank statement read: “The Bank’s preferred measures of core inflation are not yet showing meaningful evidence that underlying price pressures are easing. Near-term inflation expectations remain high, increasing the risk that elevated inflation becomes entrenched.”
