Bank of Canada raises key interest rate again to 3.75%
Global News
Since March, the central bank has raised its key lending rate to 3.75 per cent from .25 per cent, making it more expensive for Canadians to borrow money.
The Bank of Canada has raised the key interest rate by half a percentage point as it tries to further tame decades-high inflation.
Since March, the central bank has raised its key lending rate to 3.75 per cent from .25 per cent, making it more expensive for Canadians to borrow money.
The latest increase did fall short of some economists and the market’s expectations but local experts believe that provides little comfort to Canadians. The announcement has an immediate impact on people with mortgages, loans and potential homeowners.
“I’m a little surprised. I was expecting, like a lot of people, 75 basis point hike, the 50 basis point is a deceleration of the interest rate rises. It’s less than I was expecting, particularly given the reports that we just saw on inflation,” economist Jason Childs said.
“Inflation is levelling off, but the core inflation, so excluding food and fuel, is starting to show some entrenchment. So in the face of that, I was expecting another really aggressive move by the Bank of Canada.”
Experts say the bank expects it will need to raise interest rates even further as it continues its efforts to fight rising inflation. It expects inflation will return to the 2.5-per cent target by the end of 2024.
The stress of rapidly-rising borrowing costs is already taking a toll on households in Saskatchewan.
Childs says that if you have debt, more of your monthly payments are going to be paying your interest and less will go into paying the principal. “For example if you have a mortgage for about $500,000 then this latest rise is going to cost you about $120 a month,” he said. “If you have a variable rate mortgage now that’s a big hit.”