The Bank of Canada decided to hold its key interest rate steady on Wednesday amid mounting evidence the economy is slowing, but the central bank isn91裸聊视频檛 declaring victory yet as it remains cautious to not fuel speculation about rate cuts.

91裸聊视频淲ith recent evidence that excess demand in the economy is easing, and given the lagging effects of monetary policy, governing council decided to hold the policy interest rate at five per cent,91裸聊视频� the central bank said in a news release.

However, the Bank of Canada is keeping the door open to more rate hikes, noting its governing council is still concerned about inflationary pressures and 91裸聊视频渋s ready to raise interest rates further if needed.91裸聊视频�

Canada91裸聊视频檚 inflation rate was 3.3 per cent in July, ticking up from 2.8 per cent in the previous month.

Although inflation has slowed considerably since last summer, it91裸聊视频檚 expected to hover around three per cent for months to come.

The central bank acknowledges that inflation will even likely flare up due to higher gasoline prices before coming back down.

BMO chief economist Douglas Porter said the Bank of Canada91裸聊视频檚 decision to hold its key rate was widely expected given recent weak economic data. Now, the focus is turning to what the central bank might do next as it wrestles inflation down while trying not to send the economy into a deeper slowdown than necessary.

91裸聊视频淭hey91裸聊视频檝e clearly left the door open for the possibility that they might that they might move again,91裸聊视频� Porter said.

91裸聊视频�(But) our view is that, provided growth remains relatively calm and core inflation does continue to slowly come down, that the Bank of Canada91裸聊视频檚 probably done hiking interest rates.91裸聊视频�

Statistics Canada reported last week real gross domestic product contracted in the second quarter, which convinced forecasters that another rate hike would be unlikely.

91裸聊视频淭he Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures,91裸聊视频� the central bank said.

Canada91裸聊视频檚 labour market has also lost some of its steam: the unemployment rate has been on the rise for three consecutive months.

Porter says economic growth will likely continue to stall over the next few quarters, making a recession a possibility.

91裸聊视频淲e might not fall into the the official recession definition, but it91裸聊视频檚 going to be a close run for sure,91裸聊视频� Porter said.

Reaction from Canadian commercial banks on Wednesday was nearly uniform: the central bank is unlikely to raise interest rates again, despite its hawkish tone Wednesday.

But in order to keep inflation expectations in check, economist Tu Nguyen with accounting and consultancy firm RSM Canada said the Bank of Canada will likely hold its key interest rate at five per cent into 2024.

91裸聊视频淎 premature rate cut could send businesses and consumers out borrowing and spending and risk (reaccelerating) inflation again,91裸聊视频� Nguyen said in a statement.

The combination of slowing economic growth and stubborn inflation poses a challenge to the Bank of Canada: the central bank doesn91裸聊视频檛 want to go overboard with rate hikes but it also doesn91裸聊视频檛 want to spur speculation about rate cuts that would send demand in a frenzy again.

At the start of the year, the central bank had announced a pause on rate hikes that ultimately came to an end in June, as the economy outperformed expectations and the housing market rebounded.

Porter said the Bank of Canada91裸聊视频檚 messaging earlier this year on taking a pause was 91裸聊视频渦nfortunate.91裸聊视频�

91裸聊视频淚91裸聊视频檓 not sure the bank will ever explicitly say they made a mistake, but I think they were just a little bit too liberal with the with the pause language and it got everyone excited that rate hikes were done,91裸聊视频� he said.

Altogether, the central bank has raised its key interest rate ten times since March 2022, bringing it from near-zero to the highest level since 2001.

These rate hikes are expected to continue taking effect on the economy, slowing consumer demand and dampening business investment. Economists estimate it takes about one to two years for a rate hike to fully affect demand and business activity.

Bank of Canada governor Tiff Macklem is set to hold a news conference on Thursday, after delivering a speech to the Calgary Chamber of Commerce.