Bank of Canada, here’s the increase: interest rate at 3.75%
TORONTO – Said and done. Bank of Canada raised the interest rate by another 0.50, taking it from 3.25 to 3.75 percent. Since last March, the central bank has raised the reference rate six times, “with the aim of combating inflation and bringing it back to the 2% target”, as the central bank has always maintained. A goal that is far from being achieved, as the Bank of Canada admits in the statement published today on its website (here).
“In the last three months, CPI inflation has declined from 8.1% to 6.9%, primarily due to a fall in gasoline prices. However, price pressures remain broadly based, with two-thirds of CPI components increasing more than 5% over the past year. The Bank’s preferred measures of core inflation are not yet showing meaningful evidence that underlying price pressures are easing. Near-term inflation expectations remain high, increasing the risk that elevated inflation becomes entrenched”.
However, the central bank insists that “inflation will decline 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. CPI inflation is projected to move down to about 3% by the end of 2023, and then return to the 2% target by the end of 2024” says Bank of Canada, which gets its hands on already announcing the next increase, scheduled for next 7 December.
“Given elevated inflation and inflation expectations, as well as ongoing demand pressures in the economy, the Governing Council expects that the policy interest rate will need to rise further. 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. Quantitative tightening is complementing increases in the policy rate. We are resolute in our commitment to restore price stability for Canadians and will continue to take action as required to achieve the 2% inflation target”, says the central bank.
“Inflation around the world remains high and broadly based. This reflects the strength of the global recovery from the pandemic, a series of global supply disruptions, and elevated commodity prices, particularly for energy, which have been pushed up by Russia’s attack on Ukraine. The strength of the US dollar is adding to inflationary pressures in many countries. Tighter monetary policies aimed at controlling inflation are weighing on economic activity around the world. As economies slow and supply disruptions ease, global inflation is expected to come down”, according to Bank of Canada. “Expected to come down”: not for sure. Meanwhile, Canadian citizens’ mortgage payments will increase further. And this, however, is a certainty.
In the pic (from www.bankofcanada.ca) the Bank of Canada