Bank of Canada hikes interest rate to 3.25%

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The Bank of Canada delivered another supersized hike on Wednesday, raising the policy interest rate by 75 basis points to 3.25 per cent, the highest rate since the global financial crisis.

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The Bank also signalled it was continuing its quantitative tightening policy and more rate hikes would follow in an ongoing effort to stamp out decades-high inflation.

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The Bank warned of persistently high global inflation with pressures stemming from China’s ongoing COVID-19 shutdowns and volatile commodities prices in a statement accompanying the decision.

While the central bank noted inflation pressures had eased to 7.6 per cent from 8.1 per cent in July, core inflation continued to move up to a range of five to 5.5 per cent. The drop in the consumer price index was largely led by falling gasoline prices and the latest reading is still too hot for the economy to handle.

“The global and Canadian economies are evolving broadly in line with the Bank’s July projection,” read a statement from the Bank on Sept. 7, referring to the projections made in the Bank’s July economic outlook. “The effects of COVID-19 outbreaks, ongoing supply disruptions, and the war in Ukraine continue to dampen growth and boost prices.”

More to come …