Bank of Canada has once again increased its interest rate by 50 basis points bringing the interest to 4.25 percent. This is the seventh increase in interest rates in an attempt to counter or control inflation. This is the highest interest rate since 2008 but, the bank did state that there will be a pause in the increasing interest rate.

Through a news release, Bank of Canada shared it has increased its target for the overnight rate to 4.25 percent with Bank Rate at 4.5 percent and the deposit rate at 4.25 percent. The bank stated that inflation is still high around the world but there is growing evidence that tighter monetary policy is controlling the demand and consumption is balancing out in Canada.

“In Canada, GDP growth in the third quarter was stronger than expected, and the economy continued to operate in excess demand. Canada’s labor market remains tight, with unemployment near historic lows. While commodity exports have been strong, there is growing evidence that tighter monetary policy is restraining domestic demand: consumption moderated in the third quarter, and housing market activity continues to decline,” the release states.

It also adds that the bank will consider whether the interest rates need to rise further. The Governing Council will look into how the policy is working to slow demand, how inflation is responding, and how supply challenges are being tackled. This could mean that the interest rates will not increase after today. “Overall, the data since the October MPR support the Bank’s outlook that growth will essentially stall through the end of this year and the first half of next year,” the statement reads.

Lastly, the bank states that it is resolute in trying to achieve the 2 percent inflation target so that it can bring back price stability for Canadians.

Back in October, the Bank of Canada increased its interest rate to 3.75 percent which is an increase of 50 basis points. At the time, the bank stated that the policy of quantitative tightening will carry on. It was the sixth time the bank had increased rates to try and control inflation.

Vineet Washington

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