Bank of Canada raises policy rate to highest level since 2001
The Bank of Canada raised its overnight rate by 25 basis points to 4.75 per cent on Wednesday, its first increase since pausing hikes in January.
The central bank’s key interest rate has not been this high since April 2001.
Several factors led to the decision to raise the rate, including economic growth in Canada. Gross Domestic Product (GDP) exceeded expectations in the first quarter of this year, growing by 3.1 per cent.
The Bank of Canada says demand in the economy has rebounded, with strong consumer spending and an uptick in housing market activity.
“Overall, excess demand in the economy looks to be more persistent than anticipated,” reads its release.
In April, inflation increased for the first time in 10 months to 4.4 per cent. The bank still expects inflation to decline to three per cent by this summer, but concerns remain that inflation could get stuck above the two per cent target without intervention.
"What (this hike) tells us is the bank is determined to get inflation well under control," former Liberal Finance Minister John Manley said. "That means back to the target range of one to three per cent. It's not going to be satisfied with inflation continuing in the four and five per cent range."
The move will likely have at least a short-term impact on Alberta's booming real estate market.
"Expect to see housing prices start to level off or see a slight decline in the next month or so," RatesDotCA's Victor Tran said. "We're seeing some of the highest interest rates in the past 15 years with some of highest property values. So those combined together just makes everything unaffordable."
Tran is just one expert predicting another hike before September.
The next scheduled rate announcement is expected on July 12, 2023.
CTVNews.ca Top Stories
Doctors say capital gains tax changes will jeopardize their retirement. Is that true?
The Canadian Medical Association asserts the Liberals' proposed changes to capital gains taxation will put doctors' retirement savings in jeopardy, but some financial experts insist incorporated professionals are not as doomed as they say they are.
Something in the water? Canadian family latest to spot elusive 'Loch Ness Monster'
For centuries, people have wondered what, if anything, might be lurking beneath the surface of Loch Ness in Scotland. When Canadian couple Parry Malm and Shannon Wiseman visited the Scottish highlands earlier this month with their two children, they didn’t expect to become part of the mystery.
Fair in Ontario, flurries in Labrador: Weather systems make for an erratic spring
It's no secret that spring can be a tumultuous time for Canadian weather, and as an unseasonably mild El Nino winter gives way to summer, there's bound to be a few swings in temperature that seem out of the ordinary. From Ontario to the Atlantic, though, this week is about to feel a little erratic.
What do weight loss drugs mean for a diet industry built on eating less and exercising more?
Recent injected drugs like Wegovy and its predecessor, the diabetes medication Ozempic, are reshaping the health and fitness industries.
He replaced Mickey Mantle. Now baseball's oldest living major leaguer is turning 100
The oldest living former major leaguer, Art Schallock turns 100 on Thursday and is being celebrated in the Bay Area and beyond as the milestone approaches.
What a urologist wants you to know about male infertility
When opposite sex couples are trying and failing to get pregnant, the attention often focuses on the woman. That’s not always the case.
'It was instant karma': Viral video captures failed theft attempt in Nanaimo, B.C.
Mounties in Nanaimo, B.C., say two late-night revellers are lucky their allegedly drunken antics weren't reported to police after security cameras captured the men trying to steal a heavy sign from a downtown business.
Bank of Canada officials split on when to start cutting interest rates
Members of the Bank of Canada's governing council were split on how long the central bank should wait before it starts cutting interest rates when they met earlier this month.
Made-in-Newfoundland vodka claims top prize at worldwide competition
A Newfoundland-made vodka has been named one of the world’s best by judges at this year’s World Vodka Awards.