As expected the Bank of Canada increased its benchmark policy rate for an 8th straight setting.  It now stands at 4.50%.  The 25 basis-point boost was the smallest in this vigorous cycle which started pushing up rates back in March 2022.  This is being taken as a sign that the central bank is satisfied with its effort to fight inflation.

During his news conference after the rate announcement Bank of Canada Governor Tiff Macklem said there will be a “pause” in rate hikes while the Bank assesses its strategy so far.  But he cautioned it is a “conditional pause”.

“…  it is conditional on economic developments evolving broadly in line with our … outlook.” “If we need to do more to get inflation to the two-percent target, we will,” he said.

The interest rate increases have met with some success.  Inflation, as measured by the Consumer Price Index, has been dropping and now sits at 6.3%, down from the peak of 8.1% back in June.

In its Monetary Policy Report the Bank now says it expects to see inflation at 3.0% by the end of this year, and dropping to 2.0% in 2024.

That led to repeated questions about possible rate cuts.  But Macklem pushed back on the idea every time.

“Let’s keep in mind that inflation’s still over six-percent,” he said. “Inflation’s coming down, but we do have to be humble; there are a number of risks out there…. So, it’s really far too early to be talking about cuts.”