The Bank of Canada has said that more interest rate hikes are likely in coming months as
inflation remains well above its 2% target.
“Given the outlook for inflation, governing council still judges that the policy interest rate will
need to rise further,” Canada’s central bank said in its latest statement.
The comment was made after the Bank of Canada lifted its trendsetting overnight interest rate a
further 75 basis points to 3.25%, the highest level among developed nations.
It was the fourth consecutive interest rate increase by the Bank of Canada, which is trying to
lower inflation that is currently running at a 40-year high of 7.6%.
“As the effects of tighter monetary policy work through the economy, we will be assessing how
much higher interest rates need to go to return inflation to target,” the central bank said in its
written statement.
Markets are now pricing in a strong likelihood that the Bank of Canada will raise interest rates
by 50 basis points at its next policy meeting in October.
Yields on Canadian government two-year bonds rose on the latest rate hike and statement,
increasing one basis point to 3.62% in Toronto trading. The Canadian dollar fell 0.3% to
US$1.3183 per U.S. dollar.
The European Central Bank is widely expected to deliver a 75 basis point rate hike later today
(September 8), and the U.S. Federal Reserve is forecast to increase interest rates by 50 basis
points when it meets later this month.
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