BoC HIKES KEY INTEREST RATE 0.75%, SAYS IT LIKELY NEEDS TO RISE MORE

Sep 07, 2022

By Bob Komsic

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Canadians are being warned to expect interest rates to continue climbing after the Bank of Canada raised its key rate by three-quarters of a percent as it continues trying to cool inflation.
The increase, which followed a full percentage point hike in July, was what many experts were expecting and brought the central bank’s key rate target to 3.25%.
The move will mean more expensive lending rates for individuals and businesses.
”Given the outlook for inflation, the governing council still judges that the policy interest rate will need to rise further,” the central bank said in its announcement.
”As the effects of tighter monetary policy works through the economy, we will be assessing how much higher interest rates need to go to return inflation to target.”
The chief economist at TD Bank says this indicates that the Bank of Canada feels more needs to be done to lower inflation.
”The notion that they feel they have to keep going higher tells you that they’re having trouble cooling the economy down enough to take down inflation,” says Beata Caranci.
TD’s forecasting the Bank of Canada will raise its key rate to 4%.
Today’s rate hike – the 5th straight increase this year – moves it above what the central bank considers the ”neutral range” between 2 and 3%.
Should the increase lead to a recession, Caranci says the country’s top bank may decide to start cutting rates.
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