Bank of Canada raises interest rates by 50 basis points

Interest rates expected to reach 5% cap

The Bank of Canada raised its benchmark interest rate to 4.75% on Wednesday, the highest level in more than two decades. The move was widely expected by economists, who had been anticipating that the central bank would continue its aggressive tightening cycle to combat inflation.

Continued quantitative tightening

In addition to raising interest rates, the Bank of Canada also announced that it would continue to reduce its holdings of government bonds, a process known as quantitative tightening. This will help to further tighten financial conditions and put downward pressure on inflation.

Conclusion

The Bank of Canada's latest rate hike is a sign that the central bank is determined to bring inflation under control. However, it also raises concerns about the impact of higher interest rates on the economy. Some economists have warned that the Bank of Canada's aggressive tightening could lead to a recession. However, the central bank has said that it is committed to doing whatever it takes to bring inflation back to its target of 2%.