The Hill Times
The post-pandemic economic aftermath has led to inflationary pressures worldwide, and central banks are at the forefront of the battle. The Bank of Canada is no exception as it continues to face the challenge of higher-than-usual and persistent inflation. In June 2022, Canada's annual inflation rate was 8.1 per cent, which fell to 2.9 per cent by March 2024. To combat this, the BoC raised its policy interest rate in a series of 10 steps, from 0.
Higher borrowing costs slow down business investment, and put additional pressure on the servicing of Canadians' household debt. Furthermore, the bank's late monetary policy response to inflation has resulted in entrenched higher inflation expectations by consumers and firms. Although not officially acknowledged by the BoC, its interest rate actions in the last four years appear to be highly correlated with those of the U.S.
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