Bank of Canada Holds Rate Steady, Forecasts Slower Growth and Ongoing Inflation Fight Ahead

Bank of Canada held key interest rate at 5% and expects below 1% economic growth for next 3-4 quarters.

Government spending expected to exceed supply growth next year, not helpful for reducing inflation.

Recession with steep contraction and large unemployment rise not forecast, but path to soft landing has narrowed.

Higher bond yields reflect expectations of higher rates for longer needed to address sticky inflation.

Lack of Canadian dollar appreciation means more reliance on interest rate hikes rather than currency appreciation to tackle inflation.