The Bank of Canada is holding its key interest rate at five per cent — at least for the time being.

However, officials are concerned about slow progress toward price stability and increased inflationary risks.

Governor Tiff Macklem said while inflation has come down considerably since last summer, it is still too high.

“We held our policy rate steady today because monetary policy is working to cool the economy and relieve price pressures, and we want to give it time to do its job,” Macklem said Wednesday.

“But further easing in inflation is likely to be slow, and inflationary risks have increased.”

Inflation has been volatile in recent months, going from 2.8 per cent in June, up to four per cent in August, and down to 3.8 per cent in September.

Global economic growth is slowing as expected as higher interest rates and tighter financial conditions restrain demand, said Macklem.

But with increasing geopolitical tensions in the Middle East, he said there is added uncertainty to the outlook.

Here in Canada, the central bank said the economy has slowed and data suggests demand and supply are now approaching balance.

With the economy already or soon to be in excess supply, Macklem said more downward pressure on inflation should be in the pipeline.

But he said the bank’s outlook for near-term inflation is higher for a number of reasons.

“Higher energy prices, structural pressures in our housing market and stickiness in underlying inflation are all slowing the return to target,” said Macklem.

The bank forecasts that inflation will hover around 3.5 per cent through mid-2024 before easing to the two per cent target in 2025.