Bank of Canada set to raise rates in inflation fight
BNN Bloomberg
Investors expect the Bank of Canada will start an aggressive series of interest rate hikes this week as the central bank launches its campaign to wrestle inflation down from a three-decade high.
Investors expect the Bank of Canada will start an aggressive series of interest rate hikes this week as the central bank launches its campaign to wrestle inflation down from a three-decade high.
Trading in overnight swaps markets suggests there’s about a 70 per cent chance policy makers led by Governor Tiff Macklem will raise the benchmark interest rate to 0.5 per cent from its emergency low of 0.25 per cent in a decision due Wednesday morning. It would be the first of likely six moves to increase borrowing costs over the next 12 months.
“The market understands that this is long overdue and the Bank of Canada is behind the curve,” Fred Demers, strategy director at BMO Global Asset Management, said by phone. “It’s time for liftoff. The data have been screaming for tightening for a while.”
The Ottawa-based central bank -- which has already ended its bond-buying stimulus program -- joins peers like the Bank of England and Reserve Bank of New Zealand in beginning to tighten policy. The U.S. Federal Reserve is expected to telegraph a March hike at its decision Wednesday afternoon.
Macklem’s challenge is how to bring inflation back under control without stunting growth, or worse triggering a recession, as the Bank of Canada raises borrowing costs in one of the developed world’s most heavily indebted nations.
