Bank of Canada expected to kickstart rate-hiking cycle
BNN Bloomberg
The Bank of Canada is expected to start a series of interest rate hikes this week to wrestle inflation down from a three-decade high.
The Bank of Canada is expected to start a series of interest rate hikes this week to wrestle inflation down from a three-decade high.
All 27 economists surveyed by Bloomberg News anticipate Governor Tiff Macklem will raise the benchmark interest rate by a quarter percentage point to 0.5 per cent at a policy decision Wednesday. The Bank of Canada is also seen unveiling part of its plan to shrink holdings of government bonds acquired over the past two years.
The rate move would be the first increase in borrowing costs since 2018, starting what’s expected to be one of the fastest hiking cycles since the central bank adopted an inflation target three decades ago. Markets expect a total of six hikes over the next 12 months. Russia’s invasion of Ukraine is unlikely to deter the Bank of Canada, with surging prices for commodities buffering Canada from any broader global economic fallout.
“A hike this week will be the first step in the most consequential tightening cycle in decades,” Royce Mendes, head of macro strategy at Desjardins Securities Inc., said by email. “Central bankers need to slow red hot inflation without causing a recession.”
Wednesday’s decision at 10 a.m. in Ottawa is a statement-only affair with no new forecasts. But Macklem will give a speech and hold a news conference Thursday, where he’ll provide more insight into the decision.
