Another rate hike in Canada, the biggest in 24 years

In fact, expectations underestimated this new rise, putting it at 2.25% instead.

% au cours des prochains mois”,”text”:”L’inflation au Canada est plus élevée et persistante que la Banque le prévoyait dans son Rapport sur la politique monétaire d’avril, et restera probablement autour de 8% au cours des prochains mois”}}”>Inflation in Canada is higher and more persistent than forecast by the bank in its April monetary policy report and is likely to remain around 8% for the next several monthsjustifies the regulatory authority.

The Bank of Canada (BDC) also notes that many central banks are tightening monetary policy to fight inflation. The resulting more restrictive financing conditions are dampening economic growthwatch the BDC.

The Bank of Canada continues to point to the war in Ukraine and ongoing supply disruptions. main drivers of inflationbut also evokes Domestic price pressure [qui] gain in importance.

Demand needs to slow down for supply to stabilize and price pressure to easesummed up the governor of the BDCTiff Macklem, via video conference on Wednesday.

One of the Bank of Canada’s missions is to intervene in its interest rates when necessary to keep inflation in a range of 1% to 3% per year. However, this threshold was breached in April 2021 and has continued to rise ever since, reaching 5.1% at the start of the year.

Our goal is to bring inflation back to its target level of 2% and support a soft landing of the economy […]. It is absolutely necessary to restore price stability. »

A quote from Tiff Macklem, Governor of the Bank of Canada

An increase in interest rates affects individuals and businesses, who pay more interest on their mortgages and other loans, with the result that borrowing is discouraged, spending is reduced and inflation is curbedexplains the BDC.

The increase in interest rates therefore encourages individuals to save more and spend less, which slows the economy, the organization adds.

In 2022, the policy rate had previously been raised three times: by 0.25% on March 2nd, by 0.50% on April 13th and by another half a percentage point on June 1st.

This renewed one-point increase is the largest since August 1998.

When demand is strong, firms pass higher input and labor costs on to consumers by raising pricesso the bank further.

At a news conference in Kingston, Ontario, Prime Minister Justin Trudeau responded to the rate hike by linking it to his announcement of the day, a major investment to build a new battery plant for electric vehicles.

Trudeau, et c’est exactement ce qu’on est en train de démontrer ici malgré les défis dans le monde […], la pandémie, la crise climatique, et d’autres enjeux comme la guerre en Ukraine”,”text”:”L’une des meilleures choses qu’on doit faire, c’est de créer des bons emplois et de créer de la croissance économique, a répondu M.Trudeau, et c’est exactement ce qu’on est en train de démontrer ici malgré les défis dans le monde […], la pandémie, la crise climatique, et d’autres enjeux comme la guerre en Ukraine”}}”>One of the best things we should be doing is creating good jobs and economic growth, replied Mr Trudeau, and that is what we are demonstrating here despite the challenges in the world […]the pandemic, the climate crisis and other issues like the war in Ukraine.

The calendar of BDC proposes a new possibility to adjust the key interest rate on September 7th.

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