The Bank of Canada Increases Interest Rates Another 50 Points
On December 7th, 2022 at 10 am, the Bank of Canada has announced another interest rate hike of 50 points, putting the overnight rate at 4.25%, the Bank Rate at 4.5%, and the deposit rate at 4.25%.
The Simple Facts:
The rate has increased a little more than was originally expected
This is the seventh rate hike this year
This is the first time since 2008 we’ve seen an interest rate this high
Their reasoning is that inflation worldwide is still at a spectacular high, and the Canadian economy is continuing to ‘operate in excess demand.’
However, the bank seems to be alluding to a slowing or pausing in interest rate hikes in the future, stating; "the “Governing Council will be considering whether the policy interest rate needs to rise further” or not. This is different from previous announcements where they outright stated that the rate will need to continue to rise.
This announcement is the seventh increase of the year, and also the final one. It is a larger increase than many economists thought would be coming - most had predicted only 25 points.
Despite these aggressive rate increases, inflation is still incredibly high and seems to be falling slowly. The goal is to bring inflation back down to its two percent target, but at the moment, inflation is still at 6.9 percent.
Economists explain that it may take between 12 and 18 months to really see the interest rate increases reflected in the economy.
This interest rate hike means that, on average, anyone in an adjustable-rate mortgage will see an increase of $26 for every $100,000, per month.
