BC of Canada raises basic interest rate by 0.75 pp to 3.25% per year

The Central Bank of Canada (BoC) decided to raise the basic interest rate by 0.75 percentage point, from 2.5% to 3.25% per year, this Wednesday (7th). The bank rate was raised to 3.50% and the deposit rate to 3.25%.

According to the municipality, the inflation global inflation remains high and core inflation measures are rising in most countries.

“In Canada, CPI inflation declined in July to 7.6% from 8.1% due to the drop in gasoline prices. However, inflation excluding gasoline has increased, and the data indicate further amplification of price pressures, particularly in services,” the statement reads.

According to the central bank, “research suggests that short-term inflation expectations remain high. The longer this continues, the greater the risk that high inflation will take root.”

The BoC also highlighted that the Canadian economy continues to operate with excess demand and the labor market remains tight.

“The bank continues to expect the economy to moderate in the second half of this year as global demand weakens and a tighter monetary policy here in Canada begins to align demand with supply,” he predicts.

“Given the outlook for inflation, the Council still considers that the interest rate will have to rise even more and remains firm in its commitment to price stability to reach the 2% objective”, adds the municipality.