Bank of Canada expected to jack up interest rates as inflation persists

Experts predict the Bank of Canada will likely announce another major interest rate boost Wednesday as it tries to rein in runaway inflation.

After keeping its key interest rate near zero since March 2020, the central bank unveiled a pair of rate hikes in March and April — the second was by half a percentage point, an unusually big increase.

Nathan Janzen, assistant chief economist at the Royal Bank of Canada, says the overnight rate is widely expected to jump by another half-percentage point to 1.5 per cent this week, “with more increases likely in the months ahead.”

The moves mark an effort to battle inflation, which is running at its fastest pace since the early 1990s.

Experts also say robust economic growth and unemployment at multi-decade lows leave space for the slowdown targeted by the Bank of Canada’s governing council.

Stephen Tapp, chief economist of the Canadian Chamber of Commerce, says a new survey shows rising input costs are among the biggest obstacles facing businesses, prompting price hikes and an urgent need to keep interest rates pointing up.

This report by The Canadian Press was first published May 30, 2022.

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