Canada sees higher-than-expected inflation, Bank of Canada raises key interest rate by 1 percent

Representative image of Canada's food prices soar: Pixaby

Representative image of Canada’s rising inflation. Image credit: Pixaby

Ottawa/CMEDIA: Canada’s reportedly higher-than-expected inflation led the Bank of Canada to hike its overnight interest rate by 100 basis points to 2.5 percent, the biggest rate hike by the central bank since August 1998.

The war in Ukraine and ongoing supply chain issues, and excess demand in the domestic Canadian economy are attributed by the central bank as the main drivers of growing inflation which will continue and peak at around 8 percent over the next few months.

In May, the Consumer Price Index (CPI) reached 7.7 percent, its yearly highest increase in almost 40 years with more than 50 percent of price categories have risen by 5 percent.

Starting in late 2022 inflation is expected to ease and with 3 percent by the end of 2023 and back to target by the end of 2024.

Higher interest rates expected to continue until the end of this year would expectedly cause to help reduce inflation on the domestic front combined with expected price decrease in the Canadian housing market in the second half of 2022 and into 2023.

The next policy rate announcement is expected on September 7, 2022.

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