Bank of Canada set to raise its interest rate for the fifth time since March

The Bank of Canada is expected to raise its overnight rate for the fifth time, amidst historically high inflation.

“We can expect a pretty significant rate hike,” says Kevin Page, president and CEO of the Institute of Fiscal Studies and Democracy at the University of Ottawa. “Anywhere between 50 to 100 basis points.”

Statistics Canada reported inflation rose by 7.6 per cent in July, down from its peak of 8.1 per cent in June. The drop was mainly due to a decrease in gas prices; however, other price measures for food and services remained high.

The Bank raised its interest rate by 1 percentage point in July, the highest rate hike since August 1998. During a press conference following the decision, Bank of Canada Governor Tiff Macklem promised a “soft-landing” for the Canadian economy, while achieving the bank’s goal of getting inflation back to its 2 per cent target.

“We do think there is a path for a soft-landing, but I will be very frank, that path is narrowing,” said Macklem, during an interview with CTV National News on July 20.

Canada’s gross domestic product grew by 3.3 per cent during the second half of 2022, slightly below the bank’s projection of 4 per cent.

Page says this is part of a manufactured slowdown to tame inflation. “We are in for further interest rate hikes, going into the fall,” he said.

The bank will announce its decision at 10:00 a.m. ET.

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