Bank Of Canada Raises Key Rate By Full Percentage Point In Surprise Move National

The central bank’s key interest rate now stands at 2.5 percent, a sharp shift from the 0.25 percent rate seen at the start of the year. Most economists had expected a 75 basis point hike, following in the footsteps of the US Federal Reserve last month. Markets were also priced into this increase. Wednesday’s hike marks the biggest single jump in the bank’s key rate since 1998. Observers said the bank would be forced to take the big step as inflation continues to rage around the world. Global forces such as the war in Ukraine and supply chain rumblings linked to China’s COVID-19 lockdowns are among the pressures that continue to push prices higher. Story continues below ad Statistics Canada said in its latest reading that inflation reached 7.7% in May, the highest level since 1983. Trending Stories

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A pair of surveys from the central bank last week also showed that both consumers and businesses expect inflation to remain higher for longer. At the Bank of Canada’s mandate, it fights inflation by raising interest rates in an effort to make borrowing more expensive, discourage spending and ultimately take excess steam out of the economy. Canada’s economy has been heating up recently, with the country’s labor force posting a low unemployment rate of 4.9% in June and wages finally rising. RBC economists predicted last week that the central bank’s efforts to raise interest rates will push Canada’s economy into a “moderate” but “short-lived” recession in 2023. Bank of Canada Governor Tiff Macklem will comment and answer questions about the rate hike at 11 a.m. east. 4:08 Too long, too soon? Experts say soaring interest rates push Canada closer to recession Too much, too soon? Fast rates push Canada closer to recession, experts say – July 6, 2022 © 2022 Global News, a division of Corus Entertainment Inc.