Bank of Canada Raises Interest Rate to 3.25 Per Cent

The Bank of Canada has increased the overnight rate by 75 basis points increasing the interest rate to 3.25 per cent.

The Bank Rate is now at 3½% and the deposit rate at 3¼%.

The Bank of Canada said in a press release, “In Canada, CPI inflation eased in July to 7.6% from 8.1% because of a drop in gasoline prices. However, inflation excluding gasoline increased and data indicate a further broadening of price pressures, particularly in services.”

“The Bank’s core measures of inflation continued to move up, ranging from 5% to 5.5% in July. Surveys suggest that short-term inflation expectations remain high. The longer this continues, the greater the risk that elevated inflation becomes entrenched.”

Bank of Canada says though Canada’s GDP growth at 3.3% in the second quarter was lesser than the bank’s projection consumption grew by about 9½% and business investment was up by close to 12%.

The rate increase will affect mortgages, lines of credit, monetary loans and savings accounts.

The Bank says while the housing market is pulling back as expected, the Governing Council “still judges that the policy interest rate will need to rise further.”

The press release states, “As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target. The Governing Council remains resolute in its commitment to price stability and will continue to take action as required to achieve the 2% inflation target.”

The next scheduled date for announcing the overnight rate target is October 26, 2022.

There will be one more rate announcement in 2022 on Wednesday, December 7.

The rate announcement dates for 2023 are: