Analysts expecting huge Bank of Canada rate hike -

Analysts expecting huge Bank of Canada rate hike

Economists anticipate a significant base interest rate hike from the Bank of Canada later this week. Like other countries, Canada is battling to control soaring inflation which has rocketed worldwide. As a result, economists expect a rate hike of 0.75% on Wednesday. Many believe that the central bank will follow in the steps of the US Federal Reserve, which raised its base rate by 0.75% last month.

In May, inflation in Canada reached its highest level in 39 years, coming in at 7.7%, nearly four times the national bank’s target rate of 2%. In June, the Bank of Canada increased its base rate by 0.5%, taking the rate to 1.5%. However, there have been indications that the central bank is willing to be more aggressive with its monetary tightening, which could lead to a more considerable rate hike.

Related article:   When are interest rates applied?

Tiff Macklem, the the central bank’s governor. said recently: “We may need to take more interest rate steps to get inflation back to target. Or we may need to move more quickly, we may need to take a larger step.”

interest rate hikes

Calls to implement a bigger rate hike

There have been calls from some officials for the Bank of Canada to implement a more considerable rate hike this week to help control inflation. This includes the C.D. Howe Institute Monetary Policy Council, which comprises several economists who assess the central bank’s monetary policy.

Related article:   UK inflation hits new 40-year high

In addition, BMO chief economist Douglas Porter recently stated: “With the economy essentially at full employment, wages starting to stir meaningfully, and headline inflation poised to test eight per cent in this month’s consumer price index report, the Bank of Canada’s task is clear at next week’s decision.”

Laval University economics professor Stephen Gordon also said that a rate increase of higher than 0.5% is warranted in the current situation. He believes that concerns over a recession being triggered are premature.

Soaring inflation affected by domestic and international issues

The central bank has put inflation down several factors, including domestic and international issues. Some of those outlined are soaring demand, global supply chain issues, and the Russian war against Ukraine, among other things.

Related article:   Bank of England prepared to take ‘forceful’ action against growing inflation rates
Interest rate

According to HSBC chief economist David Watt, the Bank of Canada can deal with inflationary pressures that are down to domestic issues but will struggle to do anything about inflation increases that are affected by global factors.

He said: “One of the issues that we’re having when we discuss central banks is if global inflation is going to stay elevated, if they’ve got a mandate to get inflation back to below three to two per cent and the international inflation isn’t going to cooperate, do they have to generate significant downturns in domestic economic activity?”

Leave a Comment

Your email address will not be published. Required fields are marked *