Ottawa: In the sixth consecutive increase since March, Canada’s central bank on Wednesday raised its benchmark interest rate by 50 basis points to 3.75 per cent.
This is the Quantitative tightening continues and is complementing increases in the policy rate.
The central bank is also expecting that the policy rate may also be rised further soon depending on how monetary policy is working to slow demand, how supply challenges are resolving and how inflation and inflation expectations are responding to this tightening cycle.
In a statement, Bank of Canada said that this decision has been taken amid rising inflation in Canada remains high and broad-based. Inflation has come down in recent months, but we have yet to see a generalized decline in price pressures.
Governor Tiff Macklem: “Higher policy interest rates are beginning to slow demand. We expect the effects of higher interest rates to continue to work through the economy, moderating household spending and business investment.”
Since June, inflation in Canada has come down from 8.1% to 6.9%. Though welcome, most of that decline reflects a drop in gasoline prices. Inflation in Canada is broad-based, reflecting large increases in both goods and services prices.
About two-thirds of the components of the consumer price index (CPI) have risen by more than 5% over the last year. And rising prices for essentials like groceries and rent are hitting lower income Canadians particularly hard.