BANK OF CANADA HAS RAISED INTEREST RATES HIKES AGAIN BY 25BPS TAKING INTREST RATES TO A NEW 20 YEAR HIGH TODAY

BANK OF CANADA HAS RAISED INTEREST RATES HIKES AGAIN BY 25BPS TAKING INTREST RATES TO A NEW 20 YEAR HIGH TODAY.

“Higher interest rates are needed to slow growth of demand in the economy and relieve price pressures.”

“Labor market remains tight, even if there are some signs of easing.”

“BoC is prepared to raise rates further.”

“If we don’t do enough now, we’ll likely have to do even more later.”

“Governing Council did discuss possibility of keeping rates unchanged, but cost of delaying action was larger than the benefit of waiting.”

“With increases in policy rate in June and July, our outlook has inflation going gradually back to 2% target.”

Despite the drop in CPI from its peak of 8.1 per cent last summer to 3.4 per cent in May, the decline was largely driven by lower energy prices, the Bank said. Core inflation meanwhile, has proven more persistent than expected, the statement noted.

In its statement, the Bank also stated that Canada’s economy has proven stronger than expected and the labour market remains tight with wage growth at about 4 to 5 per cent.

As higher interest rates continue to permeate the economy, the bank anticipates economic growth to moderate, averaging around 1% through the second half of this year and the first half of next year. 

The Canadian economy has been stronger than expected, with more momentum in demand, the BoC noted in its policy statement. “The Governing council remains concerned that progress towards 2% inflation target could stall, jeopardizing return to price stability.” 

The BoC removed the language from the June policy statement saying ‘monetary policy was not sufficiently restrictive.’