The Bank of Canada delivered another hike to its key interest rate on Wednesday but said this could be the peak for the current tightening cycle.
The central bank raised its policy rate to 4.5 per cent in its first decision of 2023, an increase of 25 basis points. This is the highest the Bank of Canada’s key rate has been since 2007.
Wednesday’s decision marks the eighth consecutive time the Bank of Canada has raised the cost of borrowing, hiking the benchmark rate a total of 4.25 per cent in the past year in an effort to tamp down inflation.
Most economists had expected the 25-basis-point move.
But the central bank said in a statement accompanying the rate hike that it expects to hold the policy rate at its current level while it assesses the impact of its increases to date.
The Bank added that the hold is dependent on whether the economy continues to develop according to its forecast, and said additional hikes are in the cards to get inflation back down to the two per cent target.
Headline inflation has cooled from a high of 8.1 per cent in mid-2022, most recently clocking in at 6.3 per cent in December. However, pressure remains on food prices and some other inflationary inputs. The Canadian job market also remains tight, with unemployment sitting just above a record low last month.
More to come.
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