Bank of Canada raises key interest rate again

The central bank began raising interest rates in March in response to rapidly rising inflation. After peaking at 8.1% in July, the annual inflation rate has slowed to 6.9% in October.

The bank’s note, which accompanied today’s decision, represented a departure from previous hawkish language that indicated further rate hikes were definitely on the cards.

Iit said: “Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target.

“Governing Council continues to assess how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding. Quantitative tightening is complementing increases in the policy rate. We are resolute in our commitment to achieving the 2% inflation target and restoring price stability for Canadians.”

The central bank believes the Canadian economy continues to operate in excess demand, with the labour market tight and unemployment near historic lows. However, it cautioned that while commodity exports have been strong, growing evidence suggests tighter monetary policy is restraining domestic demand.