The Bank of Canada upheld its overnight rate target at 5%, aligning with its ongoing quantitative tightening policy. This decision comes amidst a global economic slowdown, with a notable shift in economic dynamics as "the US economy proving stronger and economic activity in China weaker than expected."

In Canada, evidence suggests that prior interest rate hikes are tempering economic activity and relieving price pressures. Consumer spending has been modest, particularly in housing, durable goods, and many services. The increased population has dual implications—alleviating labour market pressures in certain sectors while bolstering housing demand and consumption. However, the labour market remains tight, with recent job gains lagging behind labour force growth.

The economic outlook projects a phase of subdued growth extending into the next year, with a hopeful revival in late 2024 through 2025. This expected rebound is tied to improved household spending, stronger exports, and revitalized business investment in response to better foreign demand. The bank anticipates the Canadian economy to grow by "1.2% this year, 0.9% in 2024 and 2.5% in 2025."

Inflation has been a rollercoaster, with Consumer Price Index (CPI) inflation being "2.8% in June, 4.0% in August, and 3.8% in September." Although higher interest rates are curbing inflation in many credit-dependent goods, housing costs continue to escalate. The Bank's October projection expects CPI inflation to average around "3½% through the middle of next year" before gradually subsiding to 2% in 2025.

In a bid to restore price stability, the Bank's Governing Council remains vigilant, ready to adjust the policy rate if necessary. The council is keen on seeing a "downward momentum in core inflation" and continues to focus on balancing demand and supply in the economy. 

The Bank's next announcement for its overnight rate target is scheduled for December 6, 2023. The Bank will publish its next outlook for the economy and inflation on January 24, 2024.

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