Bank of Canada raises interest to 4.25%, highest since 2008
The Bank of Canada hiked its key interest rate by half a percentage point Wednesday to 4.25 per cent - the highest it's been since January 2008 - while signalling it may pause its aggressive rate hike cycle.
Since March, the central bank has raised its key interest rate seven consecutive times in an effort to bring inflation down and slow the economy.
“Looking ahead, 1/8 the 3/8 governing council will be considering whether the policy interest rate needs to rise further to bring supply and demand into balance and return inflation to target,” the Bank of Canada said in a news release.
That language is a marked departure from previous announcements where the bank said more rate hikes should be expected.
In note to clients, CIBC chief economist Avery Shenfeld said “the Bank of Canada flashed a yellow card on its rate hiking team.”
In its news release, the Bank of Canada said there's “growing evidence” that higher interest rates are restraining demand in the economy.
“Consumption moderated in the third quarter, and housing market activity continues to decline,” the central bank said.
The Bank of Canada said economic data released since its October interest rate decision supports its forecast that growth will stall through the end of the year and into the first half of 2023.
At the same time, it said inflation is still too high and short-term inflation expectations remain elevated.
In October, the annual inflation rate was 6.9 per cent, well above the Bank of Canada's two per cent target. However, economists have noted the three-month annualized inflation rate has dropped to below four per cent, suggesting inflation is headed in the right direction.
Forecasters were split on whether the Bank of Canada would opt for a quarter or half percentage point rate hike ahead of Wednesday's decision. Market watchers were also unsure if the central bank would continue raising interest rates in the new year.
CIBC expects the Bank of Canada to pause its rate hikes, but to keep its key rate elevated at 4.25 per cent until 2024.
“While the tightening cycle likely has reached its zenith, we'll need the pain of these higher rates to persist for a while to stall economic growth and thereby cool inflation,” said Shenfeld.
The Bank of Canada will announce its next interest rate decision on Jan. 25.
This report by The Canadian Press was first published Dec. 7, 2022.
CTVNews.ca Top Stories
BREAKING Federal employees will be required to spend 3 days a week in the office
Starting in September, public servants in the core public administration will be required to work in the office a minimum of three days a week. The Treasury Board Secretariat says executives will need to be in the office four days per week.
Concerns about plexiglass prompt inspections at some Loblaws locations in Ottawa
Inspections are underway at more than one Loblaws location in Ottawa after complaints were filed about tall plexiglass barriers.
OPP officer said 'someone's going to get hurt' before wrong-way Hwy. 401 crash
As multiple Durham police cruisers were chasing a robbery suspect on the wrong side of Highway 401 Monday night, an Ontario Provincial Police officer shared his concerns, telling a dispatcher, "Someone's going to get hurt."
Canada's most wanted fugitive arrested in P.E.I. in connection with Toronto homicide
A suspect in a fatal shooting in Toronto’s east end last summer has been arrested in Charlottetown, just one week after he topped a list of Canada’s most wanted fugitives.
Poilievre returns to House unrepentant for calling Trudeau 'wacko,' Speaker not resigning
An unrepentant Pierre Poilievre returned to the House of Commons on Wednesday to pepper the prime minister about his drug decriminalization policies after being booted the day prior for refusing to take back calling Justin Trudeau 'wacko' over his approach to the issue.
Five human skeletons, missing hands and feet, found outside house of Nazi leader Hermann Göring
Archeologists have unearthed the skeletons of five people, missing their hands and feet, at a former Nazi military base in Poland.
Toddler of Phoenix first responder dies after bounce house goes airborne
A two-year-old child died after a strong gust of wind sent the bounce house he was in airborne and into a neighbouring lot in central Arizona, the Pinal County Sheriff's Office said.
Plane overshoots runway at airport in St. John's, N.L., no injuries reported
Investigators from the Transportation Safety Board of Canada are headed to St. John's, N.L., after a plane overshot a runway at the city's airport this afternoon.
A teen was found buried in a basement in New York. An engraved ring helped police learn her identity two decades later
For more than two decades, the unknown victim was nicknamed "Midtown Jane Doe" because she was found in the Hell's Kitchen neighbourhood of New York City. But this week, investigators finally revealed her identity.