The Bank of Canada has announced an increase in its benchmark interest rate, marking its first change for nearly two years and signalling the end of the rock-bottom low rates that have persisted throughout the COVID-19 pandemic.
The country’s central bank said in its March rate announcement that it was hiking the policy rate by a quarter point to 0.50%, a move that was widely anticipated after the Bank indicated in January that rate increases were on the way.
The Bank had maintained its policy interest rate at 0.25% since the end of March 2020, having slashed the rate three times in that month as the likely impact of the pandemic on Canada’s economy became apparent.
The Bank of Canada has acknowledged in the past that inflation remains a significant concern, while also maintaining that it expects a return to more normal levels of annual price growth by the end of the year – although it indicated an increased risk today of longer-run inflation expectations.
The Canadian economy surpassed the Bank’s growth expectations in 2021’s fourth quarter, coming in at 6.7% compared with the Bank’s estimate of 5.8% in a development that will have eased the central bank’s concerns somewhat over a rate hike.
The Bank’s next announcement is scheduled for April 13, with its quarterly Monetary Policy Report also due to be published on that date.