On Wednesday morning, the Bank of Canada raised its key interest rate by 25 basis points to 4.75%, the highest it has been since 2001.
“Globally, consumer price inflation is coming down, largely reflecting lower energy prices compared to a year ago, but underlying inflation remains stubbornly high,” says the Bank of Canada.
This is the first increase since January, when the bank decided to pause hikes.
The Bank of Canada warns that more hikes could be coming.
While economic growth around the world is softening in the face of higher interest rates, major central banks are signalling that interest rates may have to rise further to restore price stability.
Here in Canada, the bank says our economy “was stronger than expected in the first quarter of 2023, with GDP growth of 3.1%”.
“Consumption growth was surprisingly strong and broad-based, even after accounting for the boost from population gains. Demand for services continued to rebound.”
The bank mentions that the housing market has picked up again and the Canadian labour market remains tight.
“Overall, excess demand in the economy looks to be more persistent than anticipated.”
In April, Canada’s annual inflation rate rose to 4.4% after it was 4.3% in March. The price of groceries, rent and mortgages, and gas continue to slowly rise.
The next scheduled date for announcing the overnight rate target is July 12, 2023.