As expected, the Bank of Canada has raised the interest rate again, and once again by 0.5 per cent. It’s the highest the overnight policy rate has been since 2008, and the Bank’s most aggressive position since the 1990s.
On February 28 this year, just eight months ago, the interest rate was 0.25 per cent. The next day, it was doubled to 0.5 per cent and the Bank’s five changes since then have all been 0.5 per cent or higher.
The current rate is a 3.75 per cent.
In making its announcement, the Bank of Canada also said:
• As economies slow and supply disruptions ease, global inflation is expected to come down
• It projects global growth will slow from 3 per cent in 2022 to about 1.5 per cent in 2023, and then pick back up to roughly 2.5 per cent in 2024
• Canada’s demand for goods and services is still running ahead of the economy’s ability to supply them, putting upward pressure on domestic inflation
• The eight months’ of rate increases are becoming evident in interest-sensitive areas of the economy: housing activity has retreated sharply
• Economic growth is expected to stall through the end of this year and the first half of next year as the effects of higher interest rates spread through the economy
• Inflation should ease as higher interest rates help rebalance demand and supply, price pressures from global supply disruptions fade, and the past effects of higher commodity prices dissipate
• It is committed to restore price stability for Canadians and will continue to take action as required to achieve a 2% inflation target
The next Bank of Canada announcement will come on December 7.