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Trendsetting interest rate rises to 0.5%

More rate increases are expected over the course of the year

By Rob Roach, ATB Economics 2 March 2022 less than a minute

The Bank of Canada has announced* the first increase to its key policy interest rate since October 2018.

The rate was reduced to 0.25% early in the pandemic, but has been increased to 0.5% in an effort to rein in inflation. At 5.1% in January, the national inflation rate is well above the Bank’s 2% target.

Despite the war in Ukraine and the uncertainty it has created, the Bank feels the Canadian economy is performing well enough to absorb a rate hike at this time.

The Bank’s announcement indicates that rates may rise again “as the economy continues to expand and inflation pressures remain elevated.”

*Each year, the Bank of Canada sets eight fixed dates on which it announces whether or not it will change its policy interest rate. The next announcement is scheduled for April 13, 2022.

Answer to the previous trivia question: Norway is home to the world’s largest sovereign wealth fund. The Government Pension Fund of Norway has about US$1.3 trillion in assets under management.

Today’s trivia question: What is compound interest?

The Bank of Canada's key policy interest rate has been increased to 0.5%

The Bank of Canada's key policy interest rate has been increased to 0.5%

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