Bank of Canada hikes key rate for first time in three years
· Toronto Sun
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OTTAWA — For the first time in three years, Canada’s central bank has raised its key policy rate — and warned that today’s hike probably won’t be the last.
On Wednesday, the Bank of Canada hiked its overnight rate by 25 basis points to 2.5%, the first time it’s raised rates since July 2023.
The central bank had held rates at 2.25% over the past year as Bank of Canada officials considered a number of factors, including skyrocketing energy prices, affordability and the ongoing conflict in the Middle East.
Bank of Canada Governor Tiff Macklem is expected to speak on the rate hike later in the morning.
Inflation on the rise
Economists weren’t 100% sure whether the Bank of Canada would indeed increase rates, as central bankers weighed the consequences in regard to Canada’s inflation-fuelled growing cost of living and affordability crisis.
While many experts expected a rate hike, some — including RSM Canada Chief Economist Tu Nguyen — told the Toronto Sun last week she was more optimistic and expected the rate to hold fast, predicting the bank wouldn’t raise rates until its December rate announcement
Data released earlier this month by Statistics Canada pegged year-over-year Consumer Price Index (CPI) growth at 3.1%.
That’s up from 3% in August, an increase that StatCan largely blamed on steep gas price hikes, which rose 27.8% year over year.
“Prices for energy accelerated in September, rising 19% year over year following a 15.4% gain in August,” the StatCan report read.
“Crude oil prices increased in September, reaching their highest level since May amid ongoing uncertainty about the wars in the Middle East, resulting in higher prices for gasoline and fuel oil.”
StatCan’s main measure of inflation, the CPI, tracks how much money Canadians pay for a fixed “basket” of goods and services, including housing, entertainment, groceries and gasoline.
On Wednesday, the Bank of Canada also raised its 2027 inflation forecast to 3.1%, up from its July prediction of 2%.
The Bank of Canada’s next rate announcement is set for Dec. 9.