Bank of Canada hikes its key interest rate to 0.5% that marks the first time it has increased
rates since October 2018.
The Bank of Canada said the war in Ukraine is “a major new source of uncertainty” that is
driving prices higher on oil and other commodities.
It is expected that this will add to inflation around the world, and negative impacts on
investors and consumers confidence and new supply disruptions could weigh on global
growth. Financial market volatility has increased. The situation would remain fluid in the
future.
The higher rate is expected to prompt the Canada’s big banks to raise their prime lending
rates, a move that will increase the cost of loans such as variable-rate mortgages that are
linked to the benchmark.
The bank has signalled that it would further increase interest rate to tamp down on
surging inflation which hit a more-than 30-year high of 5.1% in January 2022 — well above
policymakers’ stated target of two per cent.
Experts’ projects three further rate hikes of 25 basis points in the bank’s subsequent
announcements before a “pause” at 1.25 per cent for the remainder of 2022.
