'Find some balance': Economists react to Bank of Canada rate hike

“Today’s rate hike is the first step in the most consequential tightening cycle in decades."

The Bank of Canada hiked its benchmark interest rate by 25 basis points to 0.50 per cent on Wednesday.

While the bank pointed to a stronger-than-expected Canadian economy and soaring consumer price growth, it also acknowledged the conflict between Russia and Ukraine as a new risk to global growth.

Here’s how Bay Street economists are reacting to the rate move:

“Today’s rate hike is the first step in the most consequential tightening cycle in decades. Monetary policymakers are trying to slow down already-red hot inflation instead of their typical tact of heading off price pressures before they fully emerge. While the Bank of Canada will need to balance their desire to get a handle on inflation against the risks of cooling the economy too much, we expect central bankers to follow this up with another rate hike in April and two more over the course of the remainder of the year.”

- Royce Mendes, managing director and head of macro strategy, Desjardins

“With [inflation] likely to run hotter than we had expected through the first half of the year, odds are that the bank will deliver the remaining three quarter-point hikes we had allocated for 2022 over the next three rate-setting dates, rather than spread out through the year. We expect it to then pause at a 1.25 per cent overnight rate to take stock of the direction for growth and inflation, and to let quantitative tightening operate as a tool for adjusting policy, before resuming rate hikes in 2023.”