Bank of Canada Raises Overnight Rate

Increase to 3.75%

The Bank of Canada has raised its target for the overnight rate to 3.75%, with the Bank Rate at 4.25%. This is the sixth consecutive rate hike since March 2022. The move is designed to combat high inflation, which hit 7.7% in May 2023, well above the Bank's 2% target.

Economic Outlook

In its decision, the Bank of Canada acknowledged that the Canadian economy is facing significant challenges, including rising inflation, supply chain disruptions, and the ongoing effects of COVID-19. However, the Bank also noted that the labor market remains strong and consumer demand is still solid.

Rate Path

The Bank indicated that it expects to continue raising interest rates in the coming months. The pace and magnitude of further rate increases will depend on economic data and the trajectory of inflation.

Impact on Consumers and Businesses

The rate hike will have a direct impact on consumers and businesses. Variable-rate mortgages and other interest-sensitive loans will become more expensive. This could lead to higher monthly payments and reduced borrowing power. Businesses may also face higher borrowing costs, which could impact their investment and hiring plans.