The Bank of Canada has increased its overnight rate by .5%, taking it to 4.25%, the first time since 2008 the rate has hit or exceeded 4%..It’s the bank’s 7th rate increase since March when the rate was .25%, a historic low the bank instituted due to the COVID-19 pandemic..The bank has cited rampant inflation as the reason for all seven increases..“Consumer price index inflation remained at 6.9% in October, with many of the goods and services Canadians regularly buy showing large price increases,” said the bank in a press release..“Measures of core inflation remain around 5%..Three-month rates of change in core inflation have come down, an early indicator price pressures may be losing momentum. .However, inflation is still too high and short-term inflation expectations remain elevated. The bank’s target for inflation is 2%..“In Canada, GDP growth in the third quarter was stronger than expected, and the economy continued to operate in excess demand," said the bank.."Canada’s labour market remains tight, with unemployment near historic lows,”.While commodity exports have been strong, the bank said there is growing evidence tighter monetary policy is restraining domestic demand. .“Overall, the data since the October Monetary Policy Report (MPR) support the Bank’s outlook that growth will essentially stall through the end of this year and the first half of next year," it said. .The bank factors world economics into its decision..“Inflation around the world remains high and broadly based," it said.."Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October MPR.” .Most market watchers expected an increase of .25% or .5%..The bank’s language in its press release was less hawkish than at earlier increase announcements, but indicates it is prepared to continue raising the rate..“Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target,” it said..“Governing Council continues to assess how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding.” .Speaking to the parliamentary finance committee two weeks ago, the bank’s governor, Tiff Macklem, said it is walking an economic tightrope as it continues to gauge the inflation crisis..“If we don’t do enough, Canadians will continue to endure the hardship of high inflation," he said.."If we do too much, we could slow the economy more than needed." .A clue might be a statement made by Macklem in March, when he indicated the bank was prepared to take the rate to 4.25% if necessary..Of a panel of 15 economists assembled by Finder.com, eight believe the bank will pause its increases, at the very least at the next scheduled announcement on January 25, 2023, the first-time since March the economists did not anticipate a change in the central Bank’s overnight rate..Carl Gomez, chief economist with CoStar Canada, does not believe the bank will continue its rate hikes into 2023. .“The Bank is likely to tolerate this rate increase, to maintain its credibility on inflation, but with the full impact of past rate hikes not fully felt, and the potential for the economy to slip into a moderate but increasingly deeper recession, the bank is likely very close to pivoting and holding rates steady," said Gomez..On the other hand, Moshe Lander, Senior Economics Lecturer at Concordia University, said a small increase might come in January.."Given how much Canadians have been through already in 2022, the bank might lay off a little and only increase the overnight rate by 25 basis points, to send a mild signal that its work is not done and accompany it with a message that more hikes will come in 2023," said Lander..The full report can be found at (https://www.finder.com/ca/bank-of-canada-interest-rate-forecast
The Bank of Canada has increased its overnight rate by .5%, taking it to 4.25%, the first time since 2008 the rate has hit or exceeded 4%..It’s the bank’s 7th rate increase since March when the rate was .25%, a historic low the bank instituted due to the COVID-19 pandemic..The bank has cited rampant inflation as the reason for all seven increases..“Consumer price index inflation remained at 6.9% in October, with many of the goods and services Canadians regularly buy showing large price increases,” said the bank in a press release..“Measures of core inflation remain around 5%..Three-month rates of change in core inflation have come down, an early indicator price pressures may be losing momentum. .However, inflation is still too high and short-term inflation expectations remain elevated. The bank’s target for inflation is 2%..“In Canada, GDP growth in the third quarter was stronger than expected, and the economy continued to operate in excess demand," said the bank.."Canada’s labour market remains tight, with unemployment near historic lows,”.While commodity exports have been strong, the bank said there is growing evidence tighter monetary policy is restraining domestic demand. .“Overall, the data since the October Monetary Policy Report (MPR) support the Bank’s outlook that growth will essentially stall through the end of this year and the first half of next year," it said. .The bank factors world economics into its decision..“Inflation around the world remains high and broadly based," it said.."Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October MPR.” .Most market watchers expected an increase of .25% or .5%..The bank’s language in its press release was less hawkish than at earlier increase announcements, but indicates it is prepared to continue raising the rate..“Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target,” it said..“Governing Council continues to assess how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding.” .Speaking to the parliamentary finance committee two weeks ago, the bank’s governor, Tiff Macklem, said it is walking an economic tightrope as it continues to gauge the inflation crisis..“If we don’t do enough, Canadians will continue to endure the hardship of high inflation," he said.."If we do too much, we could slow the economy more than needed." .A clue might be a statement made by Macklem in March, when he indicated the bank was prepared to take the rate to 4.25% if necessary..Of a panel of 15 economists assembled by Finder.com, eight believe the bank will pause its increases, at the very least at the next scheduled announcement on January 25, 2023, the first-time since March the economists did not anticipate a change in the central Bank’s overnight rate..Carl Gomez, chief economist with CoStar Canada, does not believe the bank will continue its rate hikes into 2023. .“The Bank is likely to tolerate this rate increase, to maintain its credibility on inflation, but with the full impact of past rate hikes not fully felt, and the potential for the economy to slip into a moderate but increasingly deeper recession, the bank is likely very close to pivoting and holding rates steady," said Gomez..On the other hand, Moshe Lander, Senior Economics Lecturer at Concordia University, said a small increase might come in January.."Given how much Canadians have been through already in 2022, the bank might lay off a little and only increase the overnight rate by 25 basis points, to send a mild signal that its work is not done and accompany it with a message that more hikes will come in 2023," said Lander..The full report can be found at (https://www.finder.com/ca/bank-of-canada-interest-rate-forecast
