BoC holds key rate at 5%, keeps door open to more hikes in case of sticky inflation

"With clearer evidence that monetary policy is working, governing council's collective judgment was that we could be patient and hold the policy rate at five per cent. We will continue with that to assess whether monetary policy is sufficiently restrictive, to restore price stability, and we will monitor risks closely," Governor Tiff Macklem said in a news conference.

BMO chief economist Douglas Porter said although he doesn't expect the central bank will need to raise interest rates again, it is too soon to rule out the possibility. That's because it needs to maintain tight financial conditions to ensure both growth and inflation continue along the Bank of Canada's projected trajectory, he added.

The central bank still believes inflation will return to the two per cent target in 2025, as previously forecast. However, it anticipates inflation to be higher in the short term, averaging about 3.5 per cent through the middle of 2024.

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