Bank of Canada Holds Policy Rate at 5%, Prime Rate Remains Unchanged

Subheadline: Inflation Remains Elevated, BoC Continues to Monitor Situation

News Lead:

The Bank of Canada (BoC) has decided to maintain its policy rate at 5% at today's policy announcement. This decision comes amidst ongoing concerns about persistent inflation, which has remained above the BoC's target of 2%. The Prime Rate, which is linked to the policy rate, will also remain unchanged at 7.20%.

The BoC noted that annual inflation moderated slightly in May to 6.8%, but still remains well above the target. The Bank cited strong domestic demand, supply chain disruptions, and the war in Ukraine as contributing factors to ongoing inflationary pressures.

The BoC has been gradually raising interest rates since March 2022 in an effort to cool inflation. The policy rate has been increased by a total of 250 basis points since then, and the Bank has indicated that further rate hikes may be necessary in the coming months.

Despite the recent increases, the Prime Rate remains lower than its long-term average of 7.18%. However, it is significantly higher than the 6.70% rate seen last year.

The BoC's decision to hold the policy rate at 5% today suggests that the Bank is taking a cautious approach to further tightening. The Bank will continue to monitor economic data closely and adjust its policy stance as needed to bring inflation back towards its target.