Wednesday, May 29, 2024

Bank of Canada | The key interest rate hike is likely on Wednesday

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Maria Gill
Maria Gill
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(Ottawa) The Bank of Canada is expected to announce another major rate hike on Wednesday.

Posted at 6:44 AM

The highly anticipated announcement will be followed by a major speech by Deputy Central Bank Governor Caroline Rogers.

In July, the Bank of Canada raised its key interest rate by one percentage point to 2.50%, the largest single increase since August 1998. Many financial analysts expect that it will raise the benchmark rate again on Wednesday, perhaps by 0.75, in order to fight higher inflation. level for decades.

Inflation was 7.6% in July after it was 8.1% in June. Despite the slight slowdown, Bank of Canada Governor Teff McClem said in an opinion piece on August 16 that inflation remains a major concern and that he is determined to bring the rate down to 2%.

Meanwhile, the central bank hopes that by raising the cost of debt, spending in the economy will slow and inflation will fall.

Karen Charbonneau, managing director of economics at CIBC, believes Wednesday’s rate hike may be the last for a while. In his opinion, by next month, the economic situation in Canada may be comfortable enough to take a break for the bank.

Economist David MacDonald of the Canadian Center for Policy Alternatives warns that the rapid pace of interest rate hikes could have serious repercussions due to high levels of corporate and household debt.

MacDonald points out that private sector debt is as high as 225% of Canada’s GDP. By comparison, the last time the bank raised interest rates so quickly, private sector debt was 142% of GDP.

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Company quoted in this posting: CIBC (TSX: CM)

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