The Bank of Canada will have to keep rates above 4% in 2023

The Bank of Canada (BOC) is likely to have to keep interest rates at or above 4% for most of 2023. 

This, according to a report from the International Monetary Fund (IMF), will help the BOC cool the economy and tame inflation.

The central bank rate is currently at 4.25%, a 15-year high.

The IMF said the top priority is to bring down inflation without triggering recession. The IMF also welcomed the decisive tightening of the BOC's policy.

Money markets expect the rate to peak at 4.36% in June and end 2023 at around 4.10%.

Inflation has been declining since July, after hitting a 40-year high. At the moment, the inflation rate exceeds the central bank's target of 2% by more than 3 times.

The IMF said in a statement that inflation should continue to decline and return to the 2% target by the end of 2024. However, the IMF believes that economic growth should slow down from 3.3% in 2022 to 1.5% in 2023.