Interest Rates Up 50 Basis Points

CBJ — To no surprise, the Bank of Canada has once again increased interest rates as the battle against stubborn inflation continues.

The Central Bank had been expected to increase rates by 75 basis points, but instead opted for a slightly softer increase of 50 basis points.  The benchmark overnight rate is now set at 3.75%… the highest it’s been in many years.

The Bank of Canada dropped it’s rate to near zero early in the pandemic in 2020, but in 2022 has now increased the rate six times. It’s also quite likely the rate will continue to increase, although perhaps at a slower pace, given today’s decision. In fact, some economists have predicted the overnight rate could end up somewhere close to 4.5% or even 5% before stopping any further rate hikes. Much of that will be dependent on new inflation numbers that are released by Statistics Canada over the next several months.

The move is seen as harsh by those who owe money, but in the long-run the goal is to bring down the cost of living by forcing Canadians to spend within their means and thus borrow less money.