Bank of Canada raises its interest rate to 5%
CBC
The Bank of Canada raised its benchmark interest rate by 25 basis points on Wednesday, marking the first time since April 2001 that the figure hit five per cent.
The move was expected by economists after Statistics Canada released its June labour force survey last week, which showed that Canada added 60,000 jobs last month — further contributing to an overheated economy.
Following the announcement, experts diverged on whether Canadians could expect another increase after the summer.
"While the Bank of Canada didn't shut the door to more monetary tightening, Canadians might finally be seeing some light at the end of the rate-hiking tunnel," Desjardins economist Royce Mendes wrote in a note.
Meanwhile, CIBC economist Andrew Grantham wrote that "a continued hawkish tone within today's statement suggests that risks are skewed towards another hike after the summer."
Wednesday's rate hike marks the 10th by the central bank since March 2022. It hit pause on those hikes in January for a few months to determine whether the economy had sufficiently cooled, then resumed its campaign in June.
"Global inflation is easing, with lower energy prices and a decline in goods price inflation. However, robust demand and tight labour markets are causing persistent inflationary pressures in services," the bank wrote in its release.
Canada's economy has been more resilient than expected, the bank noted in its report.
While the hikes are meant to curb consumer spending, the report noted that "excess demand" persists, including in the retail sector — and the country's booming population contributes to job growth, spending and demand for housing.
