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Bank of Canada to Hold Key Rate at 3.25%

Interest Rates Remain Elevated Amid Inflation Concerns

Bengaluru, Aug 30 (Reuters) - The Bank of Canada is expected to hold its key interest rate at 3.25% on Wednesday, as it continues to grapple with high inflation and concerns over a potential economic slowdown.

Background and Supporting Data

The Bank of Canada's decision will come as inflation remains well above the central bank's target of 2%. The latest data showed that the Consumer Price Index (CPI) rose 7.6% year-on-year in July, marking a slight slowdown from the peak of 8.1% in June. However, core inflation, which excludes volatile food and energy prices, was still elevated at 5.9%.

The Bank of Canada has raised interest rates four times this year, with the cumulative increase totaling 225 basis points. The central bank has signaled that it is prepared to continue hiking rates to bring inflation under control.

Conclusion

The Bank of Canada's decision to hold its key rate at 3.25% suggests that the central bank is taking a cautious approach, balancing concerns over inflation with the potential impact on economic growth. While inflation appears to have peaked, it remains elevated, and the Bank of Canada is likely to continue monitoring the situation closely before deciding on future rate hikes.

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