Ottawa/CMEDIA: The Bank of Canada has made the cost of borrowing more expensive by raising its policy interest rate by 25 basis points amounting to 5% for the 10th consecutive time, the highest it’s been since 2001.
The Bank of Canada justified its rate increase in its Monetary Policy Report, and says it would help slow economic growth and reduce core inflation.
Three-month rates of core inflation hovering around 3.5% to 4% since September 2022 have been higher than the Bank’s expectation.
“The stubbornness of core inflation in Canada suggests that inflation may be more persistent than originally thought…partly due to elevated services inflation, which can adjust sluggishly, and uncertainty about expected inflation.” the Bank’s Monetary Police Report stated.
With higher interest rates, the Bank expects Canada’s real GDP growth would reportedly slow to 1.5% in the second quarter of 2023 and hover around 1% through the second half of 2023 and into the first half of 2024.
The economic growth is expected by the Bank to pick up again in 2025 with GDP growth expected to hit 2.4%.
The Bank of Canada’s next rate decision comes down September 6th, 2023.
