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Bank of Canada Holds Rates Steady Amid Inflation Pressure



In a move that may disappoint Canadian homeowners and prospective buyers, the Bank of Canada (BoC) held its overnight rate steady, defying expectations for a signal on imminent rate cuts amidst ongoing inflation adjustments. Despite progress in cooling the Consumer Price Index to 2.8% and Core CPI to 3.0% in February, the BoC projects near-term inflation to linger around 3%, cautioning that achieving the 2% target by next year faces potential headwinds. Factors such as global tensions escalating energy prices, unexpected surges in Canadian house prices, and persistent wage growth present upward risks to inflation. This stance resulted in a surge in bond yields, subsequently pressuring mortgage rates upwards, contradicting the anticipations for relief among households. Moreover, while the Canadian economy shows signs of modest recovery, global economic growth projections outpace Canada’s, increasing the risk of imported inflation. Governor Tiff Macklem emphasized the delicate balance of reducing rates without undermining inflation progress, highlighting the central bank's commitment to cautious policy adjustment.





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