Bank of Canada preview: interest rate expected to remain at 5%
The Bank of Canada should keep its overnight rate at 5%, leaving borrowing costs at a 22-year high when it makes its latest monetary policy announcement.
The BoC has always said it would not hesitate to move rates higher. However, there is very little risk at the moment with headline CPI at 3.1% in October. Inflation is still expected to return to the 2% target in 2025, however, with the central bank saying it expects inflation to be higher in the short-term and projects inflation will average about 3.5% through the middle of 2024.
(AI Video Transcript)
The Bank of Canada
The Bank of Canada, which is the country's central bank, has recently decided to keep its overnight rate unchanged at 5%. This means that borrowing costs will remain at a 22-year high. The bank's main concern is to control inflation, which is when prices for goods and services increase. However, at the moment, there is little risk of inflation. In fact, economists predict that inflation will eventually return to a target rate of 2% by 2025. In the meantime, inflation is expected to be a bit higher, at around 3.5% until mid-2024.
USD/CAD
Investors are keeping a close eye on the exchange rate between the USD and the CAD. They want to see how the Bank of Canada's decision on interest rates will affect the value of the Canadian dollar. Despite the fact that the US dollar has been recovering, today the Canadian dollar has actually decreased in value by 0.18% against the US dollar, breaking its winning streak of the past two days. This interest rate decision by the Bank of Canada has the potential to create some instability in the market and give us a clearer sense of whether the Canadian dollar will go up or down in relation to the US dollar.
Overall, what this means for someone who may not have a lot of trading experience is that the Bank of Canada has chosen to maintain its current interest rates. This decision will impact borrowing costs and could affect the value of the Canadian dollar. It is important to keep an eye on the US dollar-Canadian dollar exchange rate in order to gain a better understanding of how the Canadian dollar may perform in the near future.
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