Rates in Canada will be above 4% in 2023-IMF
2022.12.09 14:47
Rates in Canada will be above 4% in 2023-IMF
Budrigannews.com – The International Monetary Fund (IMF) stated in a report that the Bank of Canada will likely need to maintain interest rates at or above 4% for the majority of 2023 in order to temper high inflation and cool an overheated economy.
After the central bank announced a 50 basis point increase on Wednesday, the benchmark overnight interest rate is now at a nearly 15-year high of 4.25 percent.
“The key immediate priority is to bring inflation down without triggering a recession,” the IMF stated in its annual review of Canada’s economy, which was released late Thursday. The IMF also commended the Bank of Canada for its “decisive policy tightening.”
To combat inflation that is well above its target, the bank has increased interest rates at a record rate of 400 basis points in nine months. Money markets anticipate that the policy rate will reach its all-time high of 4.36 percent in June and remain roughly at 4.10 percent until 2023.
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After soaring to a four-decade high in June, inflation is still more than three times the target of 2% set by the central bank.
The International Monetary Fund predicted that inflation would return to the target of 2% by the end of 2024, and that economic expansion would slow to 3% in 2022 and 1.5% the following year.
The IMF added that unemployment should moderately rise to about 6% by next year, the level it was before the pandemic.
The forecasts are largely consistent with the Bank of Canada’s prediction that inflation will return to 2% in 2024 and that growth will fall to just under 1% in 2023.
The International Monetary Fund (IMF) stated, “Important risks, however, surround the baseline forecast, and shocks could easily push the economy into a mild recession.”
