BoC: Monetary Policy Decision Press Conference Opening Statement

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. The conflict in the Middle East is now in its fourth month. The resulting increases in energy prices and disruptions in global supply chains are weighing on global economic growth and pushing up inflation. At the same time, the US administration continues to propose new tariffs and trade policy uncertainty remains elevated. In the United States, economic growth remains solid, supported by consumption and AI‑related investment. In the euro area, growth is subdued, with higher energy prices weighing on activity. China’s economic growth continues to be supported by strong exports. Canadian financial conditions have loosened since the April Monetary Policy Report. Global equity markets have been buoyant and bond yields remain volatile. The Canadian dollar has weakened against the US dollar and other currencies. In Canada, GDP edged down by 0.1% in the first quarter, weaker than expected at the time of the April MPR. Consumer spending grew 1.4% but government spending unexpectedly declined. Housing activity also declined and business investment remained weak. Exports fell while imports rose strongly as inventories were rebuilt. Employment was up in May, but looking through monthly volatility, employment in Canada is little changed since the start of the year. The unemployment rate continues to fluctuate in the 6 ½%-7% range with the most recent reading at 6.6% in May. Recent data suggests that growth will resume in the second quarter but, even with some rebound, the economy is expected to remain in excess supply. As expected, CPI inflation rose in GOVERNING COUNCIL IS CONTINUING TO LOOK THROUGH MIDDLE EAST WAR'S NEAR-TERM IMPACT ON HEADLINE INFLATION - BOC || THERE HAS BEEN LIMITED EVIDENCE SO FAR OF A BROAD-BASED PASS-THROUGH OF HIGHER ENERGY PRICES TO OTHER CONSUMER PRICES - BOC ECONOMIC ACTIVITY IN CANADA HAS BEEN WEAK AND UNCERTAINTY ABOUT U.S. TRADE POLICY PERSISTS - BOC || GOVERNING COUNCIL WILL NOT LET HIGHER ENERGY PRICES BECOME PERSISTENT INFLATION - BOC || EVEN WITH SOME REBOUND, ECONOMY IS EXPECTED TO REMAIN IN EXCESS SUPPLY - BOC

BoC's Gov. Macklem notes that core inflation has ticked down BoC's Gov. Macklem: The bank would also look at inflation expectations when mulling a possible rate hike. BoC's Gov. Macklem: Any Bank of Canada decision on a possible rate hike is less about a timeline and more about conditions. BoC's Gov. Macklem: Not a lot has changed since our last decision; there have not been big data surprises. BoC's Gov. Macklem: The Canadian economy is not clearly in a recession; the economy is weak but not in a recession.