Bank of Canada Hikes Interest Rates Again, Now at 4.5 Percent

The Bank of Canada has once again increased its interest rate and it now sits at 4.5 percent. This is now the highest it has been since March, even though this was the lowest percentage point increase. The bank also stated that if the market responds as expected, the interest rate levels will hold.

Through an official press release, The Bank of Canada has announced another interest rate hike, this time by a quarter of a percentage point i.e 25 basis points. The interest rate now sits at 4.5 percent which is the highest it has been since March. This is also the eighth time the bank has increased its interest rate, a move that is said to combat inflation.

The Bank Rate is now at 4.75 percent and the deposit rate is at 4.5 percent. It estimates that global economic growth will slow to about 2 percent in 2023 and 2.5 percent in 2024, a contrast to 2022 when it grew by about 3.5 percent.

“The Bank’s ongoing program of quantitative tightening is complementing the restrictive stance of the policy rate. If economic developments evolve broadly in line with the MPR outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases,” the press release states. It says that there is evidence that shows the restrictive monetary policy is working by slowing activity, especially household spending.

The target is to bring inflation back to 2 percent and for that, the governing body says it is prepared to increase the interest rate further. The release adds, “Inflation is projected to come down significantly this year. Lower energy prices, improvements in global supply conditions, and the effects of higher interest rates on demand are expected to bring CPI inflation down to around 3 percent in the middle of this year and back to the 2 percent target in 2024.”

Furthermore, the release states that financial conditions have improved since October and the Canadian dollar has been relatively stable against the US dollar.

Vineet Washington