There is a broad consensus among economists that the Bank of Canada will raise its policy interest rate by half a percentage point at the next policy meeting on April 13. Here’s what that means for inflation and what is expected to be a succession of rate hikes in 2022
The Bank of Canada is expected to announce its second interest rate hike of the year at Wednesday’s policy meeting, with economists predicting it will be the largest in two decades – half a percentage point – in response to rising inflation rates.
Borrowing costs are still well below historic levels, so economists and investors expect the bank to move quickly. Financial instruments that track market expectations about rate hikes suggest the bank will raise its policy rate at each ofin 2022: April 13, June 1, July 13, Sept. 7, Oct. 26 and Dec. 7. That would move the policy rate above its prepandemic level of 1.75 per cent.
According to a Reuters poll, a majority of economists are also calling for a half-point hike this month, including the five biggest banks in Canada, as well as National Bank. The Big Five also expect another half-point rate increase at the June meeting, even though the wider poll expects the pace to slow to quarter-point hikes each month, taking the policy interest rate to 2 per cent by the end of 2022.
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