In a recent move to restore price stability and balance supply and demand in the economy, the Bank of Canada has announced an increase in its target for the overnight rate to 4 3⁄4%, with the Bank Rate set at 5% and the deposit rate at 4 3⁄4%. Additionally, the Bank has maintained its policy of quantitative tightening.

Global inflation has been decreasing, primarily due to falling energy prices, but underlying inflation remains consistent. Meanwhile, global economic growth faces a slowdown due to higher interest rates, with major central banks suggesting that further rate increases might be required to restore price stability.

U.S. economic growth is decelerating, yet consumer spending and labor markets remain robust. Meanwhile, Europe's economy has largely stalled, with core prices still under pressure. After a Q1 surge, China's growth is set to slow down.

“Financial conditions have tightened back to those seen before the bank failures in the United States and Switzerland,” the BoC report reads.

The Canadian economy, on the other hand, displayed robust performance in Q1 of 2023, posting a GDP growth rate of 3.1%. This growth was fuelled by strong consumption across sectors, alongside a resilient housing market. The labour market also displayed strength, with increased immigration and participation rates leading to an expanded supply of workers. The demand for labour remained robust, and new entrants to the job market found quick employment.

However, inflation in Canada edged up in April to 4.4%, breaking a 10-month streak of no increase, despite a decrease in energy costs. Although the Bank predicts that inflation will settle around 3% by summer, sustained core inflation and persistent excess demand have raised concerns about inflation remaining significantly above the 2% target.

The Bank stands firmly committed to achieving its inflation target and restoring price stability in the country.

The Bank has scheduled the announcement of the next overnight rate target for July 12, 2023. Alongside this, they will release a comprehensive forecast on economic and inflation trends, which will include potential risks to their projections, as part of their Monetary Policy Report.

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