Highlights
In its quarterly Monetary Policy Report issued Wednesday, the bank revised down its consumer inflation forecast further for 2023 after the latest CPI data showed continued easing, but noted that"inflation in Canada is still too high". The bank's GDP forecast for modest growth this year is little changed.
"Ongoing excess demand in the economy continues to exert upward pressure on prices," the bank said in the report."But, with lower energy prices, improvements in global supply chains and the effects of higher interest rates moving through the economy, inflation has started to ease."
CPI inflation is forecast to fall to 3 percent in mid-2023 and return to the 2 percent target in 2024. Inflation in 2023 is anticipated to be lower than projected in the October Report, mainly due to gasoline prices dropping more than expected and global supply chains improving more quickly than anticipated, the bank said.
The bank revised down its consumer inflation outlook for 2023 to 3.6 percent from 4.1 percent projected in the previous report issued in October. This compares with 4.6 percent forecast in July, 2.8 percent in April and 2.3 percent in January 2022. The consumer price index jumped 6.8 percent in 2022, as largely expected, after a 3.4 percent rise in 2021.
As for the CPI in 2024, the bank forecast the annual inflation rate will come closer to its 2 percent target, at 2.3 percent, compared to 2.2 percent forecast about three months ago and 2.3 percent projected in July and 2.2 percent in April.
"Economic growth is projected to slow at the end of 2022 and to stall through the middle of 2023," the bank predicted.
"The tightening of monetary policy initially slowed housing activity followed by consumer demand for durables in the middle of 2022," it said."The effects of the rise in interest rates are expected to broaden and moderate consumer spending on services as well as investment spending in 2023." Growth is then projected to pick up in late 2023.
As recent economic data point to resilient domestic economic activity despite higher borrowing costs, the bank revised up its 2022 economic growth forecast to 3.6 percent from 3.3 percent projected in October, 3.5 percent in July and 4.2 percent in April, following a robust 5.0 percent gain in 2021.
It raised its 2023 GDP growth forecast slightly to 1.0 percent after slashing it to 0.9 percent in October from 1.8 percent in July, when it revised down its forecast from 3.2 percent in April. The bank expects the domestic economy to grow 1.8 percent in 2024, below its projections of 2.0 percent in October, 2.4 percent in July and 2.2 percent in April.
"Ongoing excess demand in the economy continues to exert upward pressure on prices," the bank said in the report."But, with lower energy prices, improvements in global supply chains and the effects of higher interest rates moving through the economy, inflation has started to ease."
CPI inflation is forecast to fall to 3 percent in mid-2023 and return to the 2 percent target in 2024. Inflation in 2023 is anticipated to be lower than projected in the October Report, mainly due to gasoline prices dropping more than expected and global supply chains improving more quickly than anticipated, the bank said.
The bank revised down its consumer inflation outlook for 2023 to 3.6 percent from 4.1 percent projected in the previous report issued in October. This compares with 4.6 percent forecast in July, 2.8 percent in April and 2.3 percent in January 2022. The consumer price index jumped 6.8 percent in 2022, as largely expected, after a 3.4 percent rise in 2021.
As for the CPI in 2024, the bank forecast the annual inflation rate will come closer to its 2 percent target, at 2.3 percent, compared to 2.2 percent forecast about three months ago and 2.3 percent projected in July and 2.2 percent in April.
"Economic growth is projected to slow at the end of 2022 and to stall through the middle of 2023," the bank predicted.
"The tightening of monetary policy initially slowed housing activity followed by consumer demand for durables in the middle of 2022," it said."The effects of the rise in interest rates are expected to broaden and moderate consumer spending on services as well as investment spending in 2023." Growth is then projected to pick up in late 2023.
As recent economic data point to resilient domestic economic activity despite higher borrowing costs, the bank revised up its 2022 economic growth forecast to 3.6 percent from 3.3 percent projected in October, 3.5 percent in July and 4.2 percent in April, following a robust 5.0 percent gain in 2021.
It raised its 2023 GDP growth forecast slightly to 1.0 percent after slashing it to 0.9 percent in October from 1.8 percent in July, when it revised down its forecast from 3.2 percent in April. The bank expects the domestic economy to grow 1.8 percent in 2024, below its projections of 2.0 percent in October, 2.4 percent in July and 2.2 percent in April.
Definition
Since 2009 the Bank of Canada (BoC) has regularly updated its economic view via a quarterly Monetary Policy Report. This presents base-case projections for inflation and growth in the Canadian economy as well as an assessment of the risks. The forecast provides a platform upon which the monetary authority can base its decisions with regards to any changes in official interest rates (and/or unconventional monetary instruments).
Description
Each quarter, the MPR gives the financial markets a view of the BoC's governing council thinking. This provides important guidance especially since the BoC does not publish minutes from its policy setting meetings. The report is released at the same time as the policy announcement is made.
