Ottawa: The Bank of Canada raised its overnight rate by 75 basis points, moving its policy rate to 3¼%, with the Bank Rate at 3½% and the deposit rate at 3¼%.

The Bank is also continuing its policy of quantitative tightening. This will be the fifth hike in interest rates since March.

“We can expect a substantial increase in interest rates,” said Kevin Page, president and CEO of the Fiscal Studies and Democratic Institute at the University of Ottawa.

Statistics Canada said in its report that the inflation eased in July to 7.6% from 8.1% because of a drop in gasoline prices. However, inflation excluding gasoline increased and data indicate a further broadening of price pressures, particularly in services.

The Bank’s core measures of inflation continued to move up, ranging from 5% to 5.5% in July, Canada’s central bank said in a statement.

Surveys suggest that short-term inflation expectations remain high. The longer this continues, the greater the risk that elevated inflation becomes entrenched.

This decline was recorded due to the fall in gas prices. There was no fall in the prices of the rest of the food and services. In July, the bank raised its interest rates by 1 per cent, the highest since the hike in August 1998.

During a press conference, the bank’s governor Tiff McCallum promised that he would breathe only by improving the Canadian economy. The Governing Council remains resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target.

The Bank of Canada is scheduled for next overnight rate target announcement on October 26, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time, officials said in a statement.

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