Bank of Canada Raises Interest Rates Again, Signals More Hikes to Come
Historic Move Aims to Tame Inflation
Bank of Canada increases policy interest rate by 100 basis points continues quantitative tightening
In a historic move, the Bank of Canada has raised its target for the overnight rate to 3¾, with the Bank Rate at 4 and the deposit rate at 3¾. This marks the largest single increase in interest rates since 1998.
The decision comes as the Bank grapples with soaring inflation, which has reached its highest level in decades. The Bank's goal is to bring inflation back to its target of 2%, and it believes that raising interest rates will help to do this by slowing economic growth and reducing demand.
The Bank also announced that it will continue to reduce its holdings of government bonds, a process known as quantitative tightening. This will further tighten monetary conditions and help to push down inflation.
The Bank's move is expected to have a significant impact on the Canadian economy. Higher interest rates will make it more expensive for businesses and consumers to borrow money, which could slow down spending and investment.
However, the Bank believes that the pain of higher interest rates is necessary to bring inflation under control. The Bank has warned that if inflation is not tamed, it could lead to even greater economic problems in the future.
The Bank's decision is also a signal that it is prepared to take more aggressive action to fight inflation. The Bank has previously said that it would be "determined" to bring inflation back to target, and its latest move shows that it is willing to do whatever it takes to achieve this goal.
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