Bank Of Canada Raises Interest Rates By Another Quarter Point

(RTTNews) - With persistent excess demand putting continued upward pressure on prices, the Bank of Canada on Wednesday announced its decision to raise interest rates by another quarter point.

The Bank of Canada increased its target for the overnight rate by 25 basis points to 4.5 percent, in line with expectations.

The Canadian central bank also said it is continuing its policy of quantitative tightening, which it said is complementing the restrictive stance of the policy rate.

If economic developments evolve broadly in line with its outlook, the Bank of Canada expects to keep interest rates at their current level while it assesses the impact of the cumulative rate hikes.

The bank noted that it is prepared to increase rates further if needed to return inflation to the 2 percent target and remains resolute in its commitment to restoring price stability for Canadians.

The decision to continue raising rates comes as the bank said recent Canadian economic growth has been stronger than expected and the economy remains in excess demand.

However, the Bank of Canada said there is growing evidence that restrictive monetary policy is slowing activity, especially household spending.

The bank also highlighted the recent slowdown in annual price growth but noted Canadians are still feeling the hardship of high inflation in their essential household expenses

With recent data suggesting core inflation has peaked, the Bank of Canada said inflation is projected to come down significantly this year.

"Lower energy prices, improvements in global supply conditions, and the effects of higher interest rates on demand are expected to bring CPI inflation down to around 3% in the middle of this year and back to the 2% target in 2024," the bank said.