The Central Bank’s board of directors is divided over raising interest rates, and the bank issued details on Wednesday evening regarding the discussion about the October 25 decision.

Some members believed that more interest rate hikes would likely be necessary to bring inflation back to the target level, while others thought that an interest rate of 5% would be needed to bring inflation back to 2%.

Meanwhile, the Bank of Canada ultimately decided to be patient, but the board members met to reconsider whether it was necessary to raise interest rates further.

It is worth noting that on October 25, the Bank of Canada did not raise the interest rate on Wednesday and kept it at 5%. This is the second consecutive time the bank has kept interest rates at their current levels.

As at the start of the COVID pandemic, the bank cut interest rates to near zero levels to keep the economy on track. But in 2022, the bank began a series of interest rate hikes to curb inflation.

Moving interest rates from near zero to 5 percent over a year and a half has curbed spending and made borrowing costly. The inflation rate has fallen from a record high of 8.1% during the summer of 2022 to 3.8% in September.

The Bank of Canada’s board attributed the continued high inflation to several factors, including rising living costs.

The central bank also said that rising interest rates generally put downward pressure on home prices and other costs closely linked to home prices, such as maintenance, taxes, and insurance.

However, the ongoing structural shortage of housing supply in the economy has led to rising home prices, and rapid population growth in Canada has exacerbated the current mismatch between housing supply and demand.

The bank estimates that by 2025 the economy will have cooled enough for inflation to fall to the 2% target.