Bank of Canada will likely need to hold rates above 4% in 2023: IMF
The Bank of Canada will likely need to keep interest rates at or above 4 per cent for most of 2023 to cool an overheated economy and tame high inflation, the International Monetary Fund (IMF) said in a report.
The central bank's benchmark overnight interest rate currently stands at a nearly 15-year high of 4.25 per cent after a 50 basis point hike announced on Wednesday.
The IMF, in its annual review of Canada's economy released late Thursday, said "the key immediate priority is to bring inflation down without triggering a recession," and that it welcomed the Bank of Canada's "decisive policy tightening."
The bank has raised rates at a record pace of 400 basis points in nine months to fight inflation that is far above its target. Money markets expect the policy rate to peak at 4.36 per cent in June and end 2023 at about 4.10 per cent.
Inflation has been edging down after surging to a four-decade high in June, but is still more than three times the central bank's 2 per cent target.
The IMF said inflation should continue declining and return to the 2 per cent target by end-2024, while economic growth was set to slow to 3.3 per cent in 2022 and 1.5 per cent next year.
Slowing growth should also push unemployment to rise moderately and reach the pre-pandemic level of around 6 per cent by next year, IMF added.
The projections are largely in line with the Bank of Canada's forecast of growth declining to just under 1 per cent in 2023 and inflation returning to 2 per cent in 2024.
"Important risks, however, surround the baseline forecast, and shocks could easily push the economy into a mild recession," the IMF said.
(Reporting by Ismail Shakil in Ottawa; Editing by Mark Potter)
The Bank of Canada hiked its key interest rate by a quarter of a percentage point Wednesday, bringing it to 4.5 per cent. Here's a look at what the rate means, how analysts are interpreting it and what it could mean for consumers.
The federal government's latest TFSA contribution limit increase took effect as of January 1, 2023. Personal finance contributor Christopher Liew outlines how the government’s most recent TFSA contribution limit increase affects you and how to make the most of it.
Finding an affordable place to live in the territories, where housing has long been a challenge, is getting even harder, the Canada Mortgage and Housing Corporation suggested in a report released in December. In Yellowknife, the report said, the growing senior population, urbanization and strong labour market has pressured the housing supply.
Canada is suffering from a severe skills shortage in several key sectors, experts say, thanks to factors that include deficiencies in our education system as well as changing demographics. CTVNews.ca looks at some of the skills that will be most in-demand in 2023.
Bond portfolios took a beating in 2022 as interest rates climbed, but experts say investors shouldn't neglect bonds this year as the Bank of Canada nears the end of its rate hike cycle.
Even with a much cooler housing market, 2023 may still present opportunities for both buyers and sellers in Canada, one real estate broker says.
Canadian investors who made it through a tumultuous 2022 face further uncertainty in the year ahead amid increased recession risk. Investment professionals and personal finance experts say the easiest way to grow your money this year is to keep things simple.
opinion | What is the CERB advance payment?
In early 2020, 25.1 per cent of Canadians received $2,000 from the Canada Emergency Response Benefit, according to Statistics Canada. In his latest column on CTVNews.ca, personal finance contributor Christopher Liew explains how repayment works.