HomeTop Global NewsBank of Canada Just Hiked Interest Rates By a Full Percentage Point

Bank of Canada Just Hiked Interest Rates By a Full Percentage Point

If you thought the Federal Reserve’s recent interest rate hike of 0.75 percentage points was too aggressive, you might want to think again. Bank of Canada just took things to another level by increasing interest rates by a full percentage point.

The interest rates hike was widely expected in Canada as the country is trying to find ways to tame the surging inflation. But most experts predicted that the Bank of Canada would take a page from the Fed’s book and go with 75 basis points.

Instead, the Bank of Canada went with 100 basis points in what became the largest interest rate hike since 1998. This brought the policy rate to 2.5 percent, and this might not be the end of it. According to officials, if the move doesn’t bring satisfactory results, more hikes are on the way.

“With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the Governing Council decided to front-load the path to higher interest rates,” the Bank of Canada said in an official statement.

Speaking at a press conference, Bank of Canada Governor Tiff Macklem said that the aggressive hike was made in order to avoid bigger hikes in the future. Macklem argues that the move was made to get the “policy rate quickly to the top end,” which is expected to be just above the neutral range of 2% and 3%.

In the aftermath of the hike, the Canadian dollar surged compared to the U.S. dollar (USD). One USD started trading at C$1.2952, which represents a 0.5% jump.

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