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The Bank of Canada held its target for the benchmark interest rate at 4.5 per cent.

The bank's governing council will continue to assess economic developments and the impact of past interest rate increases, and is prepared to increase the policy rate further if needed to return inflation to the 2 per cent target, the central bank said in a statement.

The bank said it is continuing its policy of quantitative tightening to complement its restrictive stance, reports Xinhua news agency.

According to the bank, the Canadian economic growth came in flat in the fourth quarter of 2022, lower than it projected.

With consumption, government spending and net exports all increasing, the weaker-than-expected GDP was largely because of a sizeable slowdown in inventory investment.

Inflation eased to 5.9 per cent in January, reflecting lower price increases for energy, durable goods and some services.

Price increases for food and shelter remain high, causing continued hardship for Canadians, the bank said, adding that with weak economic growth for the next couple of quarters, pressures in product and labour markets are expected to ease.

This should moderate wage growth and also increase competitive pressures, making it more difficult for businesses to pass on higher costs to consumers, the bank said.

CPI inflation will come down to around 3 per cent in the middle of this year.

Year-over-year measures of core inflation ticked down to about 5 per cent, and three-month measures are around 3.5 per cent.

Both will need to come down further, as will short-term inflation expectations, to return inflation to the 2 per cent target, said the Bank of Canada.