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Special Report

Canada Monetary Policy
Research Brief

October 2023

Bank’s Outlook Cautiously Optimistic;
Slower Growth May Narrow Investors’ Focus

Central Bank stays put on rates amid rebalancing of economy. As expected, the Bank of Canada kept the overnight rate unchanged in October. Since the last monetary policy meeting, it has become increasingly evident that the Bank’s rate hikes are working as anticipated to balance demand with supply in the economy. Elevated borrowing costs are subduing consumer spending on both goods and services. Home sales are slowing, even amid rising listings due to increasing mortgage rates. Labour shortages are also easing as the hiring pace decelerates and elevated levels of immigration bolster labour force growth. In addition, long-term government bond yields have increased notably lately, due to market expectations that interest rates will remain elevated for longer than previously anticipated. This further tightened financial conditions, which complemented the BoC’s efforts to combat inflation. 

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