Bank of Canada hikes interest rates sharply by 75 basis points as scheduled, saying high inflation means more

time:2022-12-09 20:03:37source:chakarski.com author:Individual stock recommendation
Bank of Canada hikes interest rates sharply by 75 basis points as scheduled, saying high inflation means more

On Wednesday, the Bank of Canada raised interest rates by 75 basis points as scheduled, raising the overnight rate to 3.25%, the Canadian bank rate at 3.5%, and the deposit rate at 3.25%. After this rate hike, Canada's policy rate level is the highest among major advanced economies. September was also Canada's fourth straight rate hike of more than 25 basis points in a row. The Bank of Canada warned that given the inflation outlook, the Governing Council still sees a need for further hikes in the policy rate. On the interest rate front, in addition to giving guidance that it still expects policy rates to need to rise further, the Bank of Canada said it will assess how much higher rates are needed to bring inflation back to target as the effects of tighter monetary policy play out across the economy . The Governing Council remains firmly committed to price stability and will continue to act as needed to achieve its 2% inflation target. The Bank of Canada continued its quantitative tightening (QT) policy, which it said was complementary to policy rate hikes. Currently, global inflation remains high, and core inflation indicators in most countries are moving higher. In response, central banks continued to tighten monetary policy. Commodity prices were volatile, with oil, wheat and lumber falling while natural gas rose. In Canada, the CPI fell to 7.6% in July from 8.1% due to lower gasoline prices. However, inflation excluding gasoline is rising, pointing to further price pressures, especially in the services sector. The Bank of Canada's core inflation gauge continued to rise, rising to 5.5% in July from 5%. The Bank of Canada noted that surveys show that short-term inflation expectations remain high, and the longer this persists, the greater the risk that high inflation will become entrenched. The Bank of Canada believes the labor market remains tight as the Canadian economy continues to operate with excess demand. The bank also mentioned neighboring countries: While the U.S. labor market remains tight, economic activity in the U.S. has slowed. For the housing market, which saw unsustainable growth during the COVID-19 pandemic, the housing market retreated as the Bank of Canada expected as mortgage rates rose. The Bank of Canada said the global economy and the Canadian economy were operating in line with the bank's forecast in July. The Covid-19 pandemic, ongoing supply disruptions and the Russian-Ukrainian conflict continue to dampen economic growth and push up prices. The economy continues to expect a slowdown in the second half of the year as global demand weakens and monetary tightening in Canada begins to bring demand more in line with supply. Canada's GDP grew by 3.3% in the second quarter. While this was weaker than the central bank had forecast, some indicators were strong, such as consumption rising by about 9.5% and business investment up nearly 12%. As the Bank of Canada's interest rate decision and related statements were basically in line with expectations, the market reaction was muted, the Canadian dollar was little changed, and Canadian government bond yields rose slightly. This article is from Wall Street News, welcome to download the APP to see more
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