Daily Management Review

Bank of Canada ponders another large-scale rate hike


According to governor Tiff Macklem of the Bank of Canada, the idea of a further significant increase in interest rates to combat exceptionally high inflation has not been ruled out.

He claimed that although rate increases are causing the Canadian economy to slow down, demand is still too high.

"We have made it plain that we think additional rate increases are required. The Bank of Canada governor suggested that another rate increase that is greater than usual might be necessary or that we might soon resume more typical rate increases. Nevertheless, we continue to think that more should be done to tighten monetary policy."

Last week, the Bank of Canada surprised the markets by increasing its benchmark interest rate by 50 basis points—less than anticipated—to 3.75%. The central bank also predicted that the growth of the Canadian economy will slow down over the upcoming three quarters.

Canada's annual inflation rate, which peaked at 8.1% but has since dropped to 6.9%, is still much higher than the central bank's goal rate of 2.0%.

source: reuters.com