Bank of Canada Announces Latest Interest Rate Increase
Significant Increase Expected to Impact Mortgages and Borrowing
The Bank of Canada today announced a further increase in its target for the overnight rate, this time by 100 basis points to 4.5%. This marks the eighth consecutive increase since March 2022, bringing the key policy rate to its highest level since 2008.
The increase was widely anticipated by economists and follows on the heels of similar moves by other central banks around the world, as they battle to combat persistently high inflation. The Bank of Canada's goal is to bring inflation back down to its target of 2% over time, and it is using interest rate increases as a primary tool to achieve this.
The rate hike is likely to have a significant impact on Canadian consumers and businesses. Variable-rate mortgages and lines of credit will see their interest rates increase immediately, while fixed-rate mortgages and other long-term borrowing costs are also expected to rise in the coming months.
The impact on the Canadian economy is also likely to be significant. Higher interest rates tend to slow economic growth by making it more expensive to borrow money and invest. However, the Bank of Canada believes that the current course of action is necessary to bring inflation under control and support longer-term economic stability.
The Bank of Canada will continue to monitor economic data and adjust its policy stance as necessary. The next scheduled rate announcement is expected in October 2023.
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