The Bank of Canada announced* this morning that it is raising its trendsetting policy interest rate from 1.0% to 1.5%. This followed the 50-basis point increase back in April and is the third increase so far this year.

The increases are aimed at reducing the elevated level of inflation that has been spurred by drought, supply chain disruptions, the economic recovery from the pandemic and the Russian invasion of Ukraine.

The Bank cited that “with the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the Governing Council continues to judge that interest rates will need to rise further.”

The rate hike was mostly expected given that the national inflation rate reached 6.8% in April. However, the question remains as to how much higher the Bank will go before tightening monetary policy starts to weigh on economic activity.

*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 July 13, 2022.

Answer to the previous trivia question: In establishing the Federal Reserve System, the United States was divided geographically into 12 Districts, each with a separately incorporated Reserve Bank.

Today’s trivia question: When was the original head office building for the Bank of Canada completed?