Bank of Canada Raises Interest Rate to 3.75 Per Cent

The Bank of Canada has increased the overnight rate by 50 basis points increasing the interest rate to 3.75 per cent as the Canadian economy continues to operate in excess demand and labour markets remain tight.

The Bank Rate is now at 4% and the deposit rate at 3¾%.

Bank of Canada says though inflation declined from 8.1% to 6.9% mainly due to a fall in gasoline prices, the Bank’s preferred measures of core inflation which includes shelter and food inflation have not shown meaningful evidence that underlying price pressures are easing.

The Bank of Canada is expecting GDP growth reduction from 3¼% this year to just under 1% next year and 2% in 2024.

The press release reads, “Economic growth is expected to stall through the end of this year and the first half of next year as the effects of higher interest rates spread through the economy.”

The Bank says while the housing market is pulling back as expected and spending by households and businesses is softening, the Governing Council “expects that the policy interest rate will need to rise further.”

“Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding.”

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

The next scheduled date for announcing the overnight rate target is on Wednesday, December 7.

The rate announcement dates for 2023 are: