Bank of Canada Rate Announcement

The Bank of Canada has raised its policy rate to 3.25% today, marking the fifth consecutive rate increase in 2022. The Bank has stated borrowing costs need to rise to bring inflation back to a target of 2% from the current 7.6%. In theory, higher interest rates discourage consumer spending on goods and services, which in turn reduces demand and lowers inflation. Most economists believe the Bank of Canada will now hold the overnight rate at 3.25% until the end of 2022 to cool domestic inflation and bring the economy back to balance without triggering too severe a recession or stagflation. However, with two more rate announcements remaining in 2022 (October and December), it is quite possible that another rate hike by our central bank may be expected before the year closes out.