BoC increased the policy rate from 1.5% to 2.5%
After slashing rates to record lows at the beginning of the pandemic, the Bank of Canada(BoC) raised the overnight lending rate again, this time by a full 100 basis points, their largest increase since 1998. Per BoC Governor Tiff Macklem, it is worth noting that even with these increases, the Bank does not see inflation going down to its 2% target until at least 2024.
Why The Record Increase?
Inflation is significantly higher than expected in their April's Monetary Policy Report and consumers expectations continue to rise in Q2 of 2022.
Reasons for this include; The ongoing war in Ukraine, supply constraints in many industries, and excess demand in the broader economy.
What Could Be Next?
The Bank of Canada signals the need for more increases to reign in record inflation.
The next scheduled date for announcing the overnight rate target is September 7, 2022
The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in their MPR on October 26, 2022.