On April 13, the Bank of Canada will raise interest rates by another 0.5 percent.
In an announcement made this morning, the Bank of Canada increased its main interest rate by another 50 basis points, bringing it to one percent for the first time. This is the second of what is likely to be a series of rate rises beginning in 2022, and it is the largest single increase since the year 2000.
After a 0.25-percent hike at the Bank’s latest interest rate announcement on March 2, which was the first upward move since October 2018, and following a trio of cuts in March 2020, to assist mitigate the economic repercussions of COVID-19, the move is the first upward move since October 2018. With this new rising trend, the Bank hopes to slow the fast rise in inflation, which reached a 30-year high of 5.1 percent in January, far more than the Bank’s forecast of two percent for the month.
As a result of Russia’s unprovoked invasion of Ukraine in 2014, the Bank of England described the situation as “very unstable,” with surges in the price of oil, natural gas, and other commodities contributing to inflation while compounding existing supply chain problems.
According to the Bank of Canada, the Canadian economy is running on all cylinders, with tight labour markets and wage growth returning to levels seen prior to the epidemic. Because of the ongoing relaxation of pandemic restrictions, consumer spending is increasing, but companies are reporting difficulty satisfying demand owing to supply chain challenges. The property market is at a “exceptionally high level,” but the Bank of England expects it to level out.
What is the current policy interest rate set by the Bank of Canada?
When does the Bank of Canada make its announcement on its overnight lending rate?
When is the next announcement going to be made?
What criteria did the Bank of Canada take into consideration when making its most recent decision?
The Bank of Canada’s Policy Interest Rate Announcement Schedule for 2022 is available online.
In addition to eight times a year, often on Wednesdays, the Bank of Canada publishes its decision on the overnight rate goal. The following is the schedule for the year 2022:
The 26th of January is a Wednesday.
The second of March is a Wednesday.
Wednesday, April 13th, 2019 *
The first of June is a Wednesday.
Wednesday, July 13th, 2018
The 7th of September, Wednesday
Wednesday, October 26th, 2018*
The 7th of December is a Wednesday.
*The publication of the Monetary Policy Report
Please see the following for the complete announcement:
Earlier today, the Bank of Canada upped its objective for the overnight rate to 1 percent, with the Bank Rate remaining at 11.4 percent and the deposit rate remaining at 1 percent. In addition, the Bank will discontinue reinvestment and will commence quantitative tightening (QT) on April 25, which will take effect immediately. Because the Bank will no longer be replacing maturing Government of Canada bonds on its balance sheet, the size of the bank’s balance sheet will shrink over time as a result of this change.
In the meantime, Russia’s continuous invasion of Ukraine is generating enormous human misery and a new wave of economic instability. Prices of oil, natural gas, and other commodities have risen sharply recently, contributing to inflation throughout the world. Supplies are being disrupted as a result of the war, which is increasing existing supply limitations and putting a pressure on the economy. These are the key elements for the Bank of Canada’s considerable upward adjustment to its inflation forecast for the country in 2015.
The conflict in Ukraine is interfering with the global recovery, which is occurring at a time when most economies are recovering from the effects of the Omicron form of COVID-19. The war’s confidence impacts and supply disruptions have a greater impact on European countries than on other parts of the world. The Chinese economy is dealing with fresh COVID outbreaks as well as a continuing decline in the country’s housing market. In the United States, domestic demand continues to be quite robust, and the Federal Reserve has made it plain that it intends to utilise its monetary policy instruments to keep inflation under tight control. As a result of the withdrawal of policy stimulus, it is projected that US economy would decrease to a pace more in line with potential growth. The global financial environment has become tighter, and volatility has grown as a result. Currently, the Bank expects global growth to be around 312 percent this year, 212 percent in 2023, and 314 percent in 2024.
In Canada, the economy is expanding at a rapid pace, and the country is approaching a point of surplus demand. Labor markets remain tight, and pay growth has returned to the pre-pandemic level and is continuing to rise. Increasingly, businesses indicate that they are having problems meeting demand and that they are able to pass on higher input costs to customers by raising prices. Despite the fact that the COVID-19 virus continues to evolve and disseminate, high vaccination rates have significantly decreased the infection’s health and economic consequences. Growth appears to have been better in the first quarter than had been forecast in January, and it is expected to accelerate in the second quarter as well. As a result of the relaxation of pandemic containment measures, consumer spending is on the increase. As a result of robust overseas demand and high commodity prices, exports and corporate investment will continue to recover. The housing market’s activity, which has reached an all-time high, is projected to slow down.
The Bank of Canada predicts that the Canadian economy would grow by 414 percent this year, before falling to 314 percent in 2023 and 214% in 2024, respectively. Increased company investment, more labour productivity growth, and increased immigration will all contribute to the expansion of the economy’s productive capacity, but higher interest rates will have a dampening effect on growth in domestic demand.
Canadian consumer price inflation is 5.7 percent, above the Bank of Canada’s prediction in its January Monetary Policy Report (MPR). As a result of rising energy and food costs, together with supply interruptions and strong global and domestic demand, inflation is on the rise globally and domestically. As pricing pressures expand, the core gauges of inflation have all risen in recent months. It is now projected that CPI inflation will average about 6 percent in the first half of 2022 and will continue significantly above the target range throughout the rest of the year. In the second half of 2023, it is predicted to decline to around 212 percent, before returning to the 2 percent objective in 2024. Expectations of rising inflation are becoming more established, which raises the possibility that they will become permanent. The Bank will use its monetary policy tools to bring inflation back to target and to ensure that inflation expectations remain well-anchored in the short term.
Due to the fact that the economy has entered a period of excess demand and that inflation is considerably over goal, the Governing Council believes that interest rates will need to be raised further. Although the policy interest rate is the Bank’s principal monetary policy instrument, hikes in the policy rate will be complemented by tightening of the financial conditions. The Bank’s continued assessment of the economy, as well as its commitment to reaching the 2 percent inflation objective, will drive the timing and pace of any future rises in the policy rate.