September has arrived and the central bankers are back from their summer vacations. With that they resume setting interest rates and fighting inflation.  Leading up to today market watchers were forecasting an increase of  50 – 75 basis points.  Today at 10am the BoC raised the overnight rate by 75 basis points to 3.25%.

They indicated in the announcement that “the economies are evolving broadly in line with their July projection”.

This increase has pushed the BoC’s trend-setting overnight rate out of its neutral zone and into restrictive territory.  The Bank considers a 2% to 3% rate to be neutral; it neither enhances nor restricts economic growth.

Market watchers are now suggesting that we can see the Bank of Canada stay put for the remainder of 2022, due to the idea that heavy debt loads being carried by Canadian households are amplifying the effects of interest rate increases and inflation, although it is being discussed that we can see the overnight rate at 3.50% by the end of the year – there are another two meetings for the remainder of the year.

The next Bank of Canada meeting is scheduled for October 26, 2022.

Read the full announcement here