Bank of Canada raises rates, first major bank to freeze benchmarks | Business and Economic News

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After raising rates to their highest level in 15 years, the central bank said it would put further hikes on hold for now.

The Bank of Canada on Wednesday raised its key interest rate to 4.5 percent, the highest level in 15 years, and became the first major central bank to face global inflation that said it would likely add hold off on further promotions for now.

The 25-basis-point increase was in line with analysts’ expectations. The bank has raised rates by a 10-month high of 425 basis points to tame inflation, which peaked at 8.1 percent and slowed to 6.3 percent in December, still more than triple the bank’s 2 percent target.

Governing Council members are clearly confident enough that the current tightening is slowing the economy that they are comfortable not having to raise rates further in most conditions,” said Andrew Kelvin, chief Canadian strategist at TD Securities. .

This year’s growth will be stronger than expected in October but is expected to stall during the first half, the bank said in its quarterly Monetary Policy Report (MPR), which includes new forecasts. Inflation will fall to around 3 percent around the middle of this year, and will reach a target next year.

“We are turning the corner on inflation,” Bank of Canada Governor Tiff Macklem told reporters. “We are still far from our target, but recent developments have reinforced our confidence that inflation is coming down.”

If the economy changes as expected, the bank “intends to keep the policy rate at the current level while it assesses the impact of interest rate increases,” the statement announcing the rate hike said.

“The Governing Council is prepared to increase the policy rate further if necessary to return inflation to the 2 percent target,” the statement said.

The central bank had said in December that future rate decisions would depend on data, and the December employment report, released earlier this month, highlighted the downside risk to wage growth and prices.

“The Bank of Canada is back to using positive guidance,” said Royce Mendes, director and head of macro strategy at Desjardins. “That will probably ensure a pause in the rate hike cycle for at least the next few months.”

While rising food and shelter costs continue to weigh on households and headline inflation remains high, the bank said in its MPR that “three-month CPI inflation has fallen to around 3.5 per cent, suggesting that inflation is slowing in the coming months.”

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