On Wednesday, the Bank of Canada hiked its main interest rate by half a percentage point in a bid to rein in decades of excessive inflation.
This is the central bank’s sixth straight rate rise this year. Since March, the Bank of Canada has hiked its main interest rate from 0.25 percent to 3.75 percent, making borrowing more expensive for Canadians and companies.
Most economists predicted an interest rate hike, although several advocated for a higher 75-basis-point increase.
While total inflation dropped to 6.9 percent last month due to lower gas costs, the central bank has since suggested that additional rate rises are required to return inflation to its objective of 2%.
In a statement accompanying its rate rise, the Bank of Canada stated that higher interest rates, an improvement in the global supply chain, and lower commodity prices are likely to drive inflation down to 3% by the end of next year and back to the 2% objective by the end of 2024.
However, the Fed stated on Wednesday that its preferred measurements of core inflation “do not yet reveal substantial signs that underlying pricing pressures are lessening.”
The bank’s governing council anticipates the policy rate will “need to climb further” due to rising inflation expectations and “ongoing demand pressures in the economy.”