Bank of Canada expected to announce another interest rate hike amid recession fears
Global News
Wednesday's announcement would make it the sixth consecutive time the Bank of Canada raises interest rates this year in response to decades-high inflation.
Even as warnings about a potential recession grow louder, the Bank of Canada is expected to announce another hefty interest rate hike on Wednesday, edging the bank closer to the end of one of the fastest monetary policy tightening cycles in its history.
RBC senior economist Nathan Janzen says it’s a coin toss between the Bank of Canada choosing to raise its key interest rate by half a percentage point or three-quarters of a percentage point, though RBC is leaning toward the smaller increase.
“It’s pretty clear that more aggressive interest rate hikes are still warranted,” Janzen said.
Wednesday’s announcement would make it the sixth consecutive time the Bank of Canada raises interest rates this year in response to decades-high inflation. It also comes amid growing fears that a recession is looming.
Last week, Finance Minister Chrystia Freeland shifted her tone on the economy from her usual praises of Canada’s strong pandemic economic recovery. She warned tough times are ahead for Canadians.
“Mortgage payments will rise. Business will no longer be booming,” Freeland said. “Our unemployment rate will no longer be at its record low.”
As well as the interest rate decision, the Bank of Canada will also release updated economic projections on Wednesday in its latest quarterly monetary policy report. The central bank’s outlook on inflation will be key to its plans for any additional rate hikes to come.
Since March, the Bank of Canada has raised its key interest rate from 0.25 to 3.25 per cent, feeding into higher borrowing costs for Canadians and businesses.
