The Bank of Canada increased its key overnight lending rate again on Wednesday, although the hike was more measured than some economists were expecting.
The bank hiked its rate by 0.5% today, rather than the 0.75% increase some were anticipating as it continues its fight to tame the hottest inflation rate in decades. Now standing at 3.75%, the Bank has hiked its policy rate six times since March.
Still, the Bank said in its announcement that more rate increases will likely be necessary to eventually return the inflation rate – which was running at 6.9% in September - to its preferred level of around 2%.
“Given elevated inflation and inflation expectations, as well as ongoing demand pressures in the economy, the (Bank) expects that the policy interest rate will need to rise further,” it said. “Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding.”
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