The Bank of Canada has hiked its overnight target rate by 25 basis points to 5.00%.
The move was expected by markets and marks the Bank’s 10th rate hike since starting this rate-hike cycle in March 2022.
In its statement, the Bank stated “Governing Council will continue to assess the dynamics of core inflation and the outlook for CPI inflation. In particular, we will be evaluating whether the evolution of excess demand, inflation expectations, wage growth and corporate pricing behaviour are consistent with achieving the 2% inflation target. The Bank remains resolute in its commitment to restoring price stability for Canadians.”
Inflation eased to 3.4% in May from it’s peak of 8.1% last summer however demand and labour markets are causing inflationary pressures.
The Bank has said that it expected inflation to hit 2% by the middle of 2025, a “slower return to target” than it had forecast in January and April.
Whether or not today’s move will be the Bank’s last of the year remains to be seen. CIBC Capital Markets senior economist Andrew Grantham said June’s strong jobs figures had “tipped the scales” towards a rate hike today – but added that CIBC currently expects the overnight rate to rise no higher than 5% this year.
The next rate announcement is scheduled for Wednesday, September 6.
Source: MPC, Bank of Canada, CMP