Read the full statement Bank of Canada Governor Tiff Macklem delivered following the announcement that the central bank is increasing its key policy rate half a point, taking it to 3.75 per cent.
The Bank of Canada raised its key policy rate half a point Wednesday taking it to 3.75 per cent.
Second, and related, the economy is still in excess demand—it’s overheated. Households and businesses want to buy more goods and services than the economy can produce, and this is driving prices higher. Let me expand on these considerations and highlight the key points in the Governing Council’s deliberations.
Since June, inflation in Canada has come down from 8.1 per cent to 6.9 per cent. Though welcome, most of that decline reflects a drop in gasoline prices. Inflation in Canada is broad-based, reflecting large increases in both goods and services prices. About two-thirds of the components of the consumer price index have risen by more than 5 per cent over the last year. And rising prices for essentials like groceries and rent are hitting lower income Canadians particularly hard.
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