Bank of Canada hikes benchmark interest rate to 1%

The Bank of Canada hiked its benchmark interest rate by half a percentage point to one per cent on Wednesday in its latest move to rein in high inflation.

The bank’s rate impacts Canadian businesses and consumers by influencing the rates they pay and receive on things like mortgages, GICs and savings accounts.

The bank slashed its rate to barely above zero in March of 2020 when the pandemic began.

While the move helped the economy to weather the unprecedented uncertainty of COVID-19, in recent months, inflation has come roaring back to its highest level in decades, prompting the central bank to start unwinding all that cheap credit.

It’s the second time in as many months that the bank has ratcheted its rate higher, and as such Wednesday’s move is both the bank’s first back-to-back rate hike since 2017, as well as its biggest single hike since the year 2000.

Economists were expecting the move, and with inflation flirting with six per cent, they expect more to come, at least until the central bank’s rate gets up to two per cent — and possibly beyond.

Officials at the bank including governor Tiff Macklem will have more to say about the bank’s decision at a press conference in Ottawa starting at 11 a.m. Wednesday. 

More to come.

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