Not surprisingly, the Bank of Canada’s key rate rose again, from 1% to 1.5%.
This is the third time in 2022 that the Bank of Canada has raised its policy rate, known as the overnight rate target.
Inflation continues to rise around the world, including Canada, largely driven by higher energy and food prices.said the Bank of Canada in a statement Wednesday morning.
In Canada, inflation reached 6.7% in April, a rate that far exceeds the Bank’s forecasts. It predicts that inflation should continue rise for a short time before starting to fall.
” The Bank will use its monetary policy tools to bring inflation back to target and keep inflation expectations anchored. “
The Bank of Canada explained the rise in inflation in particular the war in Ukraine, the detentions associated with COVID-19 in China and the continuation of supply disruptions.
The war increased uncertainty and exacerbated upward pressures on the prices of energy and agricultural commodities.will we read in the press release. Global financial conditions are tightening and markets are volatile.
The key rate is the primary tool used by the Bank of Canada to control inflation. When it rises, certain interest rates, such as those on mortgages or student loans, also rise.
In doing so, by raising its core rate, the Bank of Canada is trying to encourage Canadians to save more, time to return inflation to its 2%target.
It typically takes 6 to 18 months for the basic interest rate increase to have a concrete impact on the economy. However, analysts estimate that the core rate will reach 2% by the end of the year, and even 2.5% next year. Prior to the COVID-19 pandemic, it was at 1.75% since October 2018.
The Bank of Canada is adjusting the target for the overnight rate (New window) on eight pre -established dates each year (New window). The next update is on July 13th.
Source: Radio-Canada
