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Canada

Bank of Canada raises policy rate to 2.5% and signals caution on further hikes

The first rate increase since 2023 raises borrowing costs for Canadians and businesses and reflects concern about energy-driven inflation.

Photo: Yahoo News

What happened

The Bank of Canada raised its policy interest rate by 25 basis points to 2.5 per cent, the first increase since July 2023. Bank of Canada+2 Governor Tiff Macklem said the decision was needed because the outlook for inflation was substantially higher and the economy was showing resilience. Yahoo News Macklem told the House of Commons Standing Committee on Finance that policymakers would proceed cautiously on further increases. Morningstar He said there could be a need to raise rates further, while acknowledging heightened uncertainty from Middle East developments and Canada-U.S. trade relations. Morningstar

Around it

Global oil prices have risen with the war in the Middle East and are expected to remain higher for longer, raising costs at the gas pump and for many businesses. Bank of Canada Growth improved modestly through the middle of the year despite continued trade actions by the United States. Bank of Canada The Bank of Canada's Business Outlook Survey found firms plan to pass more higher costs on to customers, and households expect faster inflation. The Globe and Mail Best standard savings account rates rose to 3.25 per cent and the top one-year GIC rate rose to 4.05 per cent, while longer-term GIC rates moved less. The Globe and Mail

What comes next

The federal government plans to release its next budget on November 5, which is expected to include tax incentives for small and medium-sized businesses to reinvest. Yahoo News

Sources

  1. Bank of CanadaOpening Statement before the House of Commons Standing Committee on Finance
  2. MorningstarBank of Canada Gov. Macklem Pledges to Proceed Carefully on Further Rate Increases
  3. Yahoo NewsBank of Canada maintains stance on rate hike ahead of Nov. 5 budget release
  4. The Globe and MailSavers get a raise as the Bank of Canada turns hawkish

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