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The Bank of Canada is holding its key interest rate at 5% but states it’s ready to “increase the policy interest rate further if needed”.

“Inflation in advanced economies has continued to come down, but with measures of core inflation still elevated, major central banks remain focused on restoring price stability,” reads a statement issued by the Bank of Canada.

The Bank states that “the Canadian economy has entered a period of weaker growth” and this is “needed to relieve price pressures”. In the second quarter of 2023, Canada’s economy contracted at an annualized rate of 0.2%.

“This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country.”

In July, Canada’s annual inflation rate rose to 3.3% last month, an increase from the 2.8% in June.

“The longer high inflation persists, the greater the risk that elevated inflation becomes entrenched, making it more difficult to restore price stability,” said the Bank of Canada.

The Bank of Canada mentions that “inflationary pressures remain broad-based” and that “CPI inflation is expected to be higher in the near term before easing again” due to higher gas prices.

The next scheduled date for announcing the overnight rate target is October 25th, 2023.