UPDATE - Bank of Canada keeps interest rates unchanged

UPDATES WITH MACROECONOMIC FORECASTS

By Ovunc Kutlu

ISTANBUL (AA) - The Bank of Canada on Wednesday kept interest rates unchanged and said it continues its policy of quantitative tightening.

The target for the overnight rate was maintained at 5%, with the bank rate at 5.25% and the deposit rate at 5%.

"The Bank expects the global economy to continue growing at a rate of about 3%, with inflation in most advanced economies easing gradually," the central bank said in a statement.

"Inflation continues to slow across most advanced economies, although progress will likely be bumpy. Inflation rates are projected to reach central bank targets in 2025," it added.

The central bank noted that consumer inflation in Canada slowed to 2.8% in February, with easing in price pressures becoming more broad-based across goods and services.

"However, shelter price inflation is still very elevated, driven by growth in rent and mortgage interest costs," said the statement.

Core measures of inflation, which had been running around 3.5%, slowed to just over 3% in February, according to the bank.

"While inflation is still too high and risks remain, CPI and core inflation have eased further in recent months," it added.

The Bank of Canada said it has revised up its forecast for global GDP growth to 2.75% for this year, and around 3% for 2025 and 2026.

"The US economy has again proven stronger than anticipated, buoyed by resilient consumption and robust business and government spending. US GDP growth is expected to slow in the second half of this year, but remain stronger than forecast in January. The euro area is projected to gradually recover from current weak growth," said the statement.

"In Canada, economic growth stalled in the second half of last year and the economy moved into excess supply. A broad range of indicators suggest that labour market conditions continue to ease," it added.

The central bank said economic growth in Canada is forecast to pick up this year, which largely reflects both strong population growth and a recovery in spending by households.

The bank said it estimates Canada's GDP growth to come in at 1.5% in 2024, 2.2% in 2025, and 1.9% in 2026.