The Bank of Canada has decided to raise the benchmark interest rate by 50 basis points, the biggest rate hike in 22 years, to 1%, as announced on Wednesday. North American central bank.
Similarly, the Bank of Canada announced that it will begin to reduce its balance by ending the reinvestment of bond maturities in its portfolio, which will no longer be replaced.
The institution expects the Canadian economy to grow 4.25% this year before slowing to 3.25% in 2024 and 2.25% in 2024, as it expects inflation, currently at 5.7%, averages nearly 6% in the first half of 2022 and remains well above. the control range throughout this year to return to 2.5% in the second half of 2023 and return to the target of 2% in 2024.
However, the Canadian central bank admits that “there is a growing risk that high inflation expectations will materialize”, for which it reiterated its commitment to using monetary policy tools to bring inflation back to target and maintain well-anchored inflation expectations.
“As the economy heads into excess demand and inflation persists well above target, the Governing Council believes that interest rates will need to rise further,” he warned.
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