Bank of Canada says key interest rate remains 5% amid weakening economy

The Bank of Canada is keeping its key interest rate at five per cent due to recent evidence that suggests the economy is becoming weaker.

The central bank said in a release Wednesday that they decided not to raise the key rate due to the slowing demand in the economy and previous rate hikes that need more time to take effect.

This announcement comes after the Bank of Canada raised interest rates at its last two meetings, bringing a previous pause on rate hikes to an end.

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Forecasters widely expected this decision after recent data that shows the economy shrank in the second quarter, while the unemployment rate has been on the rise for three consecutive months.

Bank of Canada’s governing council says they are still concerned about inflationary pressures and are ready to raise interest rates further if needed.

Canada’s inflation rate was 3.3 per cent in July, an increase from the previous month. It is expected to remain around three per cent for the rest of the year.