Bank of Canada Increases Interest Rate

The Bank of Canada has increased its interest rate again. The overnight rate is now increased to 1.5%, the Bank Rate is now 1.75%, and the deposit rate is at 1.5%. This is in addition to the Bank’s ‘quantitative tightening’ policy, which intends to decrease the amount of liquidity in the economy that is currently causing inflation.

The interest rate has been adjusted due to inflation in Canada, which has been contributed to due to the high prices of energy and food. An interest rate adjustment is made to help return inflation to the target for this year.

Inflation can be partially faulted to the war in Ukraine, COVID lockdowns that are still taking place in China, and a number of supply disruptions across the globe.

In the Bank of Canada press release that was released today, they state that the economy in Canada is still strong, and thus operating in ‘excess demand.’

Interest rates are expected to rise further in the coming months in order to bring inflation down from where it currently is, which, in addition to quantitative tightening, should help return inflation to its expected rate.

The next interest rate announcement will be on July 13th.