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Borrowing costs rise again

The Bank of Canada has raised its policy rate to 4.5%

By Rob Roach, ATB Economics 25 January 2023 1 min read

Citing “persistent excess demand putting continued upward pressure on many prices,” the Bank of Canada announced* this morning it is raising its trendsetting policy interest rate from 4.25% to 4.5%.

This was the eighth increase in a row.

Is the hiking cycle over or will the Bank take rates even higher in its fight against inflation?

It depends.

According to today’s news release, if the economy slows down enough to “allow supply to catch up with demand,” the Bank says it will “hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases.”

But, the Bank “is [also] prepared to increase the policy rate further if needed to return inflation to the 2% target, and remains resolute in its commitment to restoring price stability for Canadians.”

We will still have to wait and see.

*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 March 8, 2023.  

Answer to the previous trivia question: The Canadian dollar hit its all-time low against the US dollar when it dropped to 61.79 cents (US) on January 21, 2002.

Today’s trivia question: The Federal Reserve System (a.k.a. the Fed) is the central bank of the United States. In what year was it created?

The Bank of Canada has increased its policy rate for the 8th time in a row

The Bank of Canada has increased its policy rate for the 8th time in a row

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