Bank of Canada expected to make sharpest interest rate increase since 1998
PUBLISHED by Mark Rendell on July 11th 2022 in The Globe and Mail.
The Bank of Canada is widely expected to announce its biggest interest rate increase since 1998 this week, continuing to push borrowing costs higher in an effort to keep inflation expectations anchored and to slow the pace of consumer price growth.
The consensus among investors and Bay Street economists is that the central bank will raise its benchmark rate by three-quarters of a percentage point on Wednesday. That would be three times the size of a typical interest rate hike and push the bank’s policy rate well above the prepandemic level.
Higher borrowing costs are already putting pressure on key segments of the Canadian economy, notably the housing market, which has slowed in recent months. But central bank officials have said getting a handle on inflation, and preventing Canadians from losing faith in the bank’s 2-per-cent inflation target, is their overwhelming priority.