The benchmark interest rate of the Bank of Canada has gone up by 50 basis points to 4.25 percent.
The central bank said in a statement on Wednesday that the bank’s governing council will be debating whether the policy interest rate needs to increase any more to restore supply and demand to equilibrium and bring inflation back to target.
The bank stated, “We are steadfast in our commitment to achieving the 2% inflation target and restoring price stability for Canadians.
The bank noted that measures of core inflation remain around 5% and that three-month rates of change in core inflation have decreased, an early sign that price pressures may be losing momentum. Canada’s CPI inflation remained at 6.9% in October, with many of the goods and services Canadians frequently purchase showing large price increases.
However, short-term inflation expectations are still strong and inflation is still too high.
According to the bank, there is a greater risk of persistently high inflation the longer consumers and businesses anticipate inflation to be above target.
The bank reported that Canada’s third-quarter GDP growth was higher than anticipated and that the economy was still experiencing excess demand.
With unemployment hovering close to historic lows, the labour market remains tight.
Although commodity exports have been robust, there is mounting evidence that tighter monetary policy is stifling domestic demand. According to the bank, third-quarter consumption moderated and housing market activity continued to decline.
According to the bank’s forecast, the nation’s economic growth will essentially stagnate throughout this year’s end and the first half of next.
The quantitative tightening is continuing and complementing rises in the policy interest rate.