Interest rates are once again on the rise, soaring to their highest levels since the year 2001. Please feel free to share this blog post with your family and friends!

"The Bank of Canada raised its key overnight lending by 25 basis points — a quarter of a percentage point — to 4.75 per cent Wednesday morning, citing a stream of stronger than expected economic data. That’s the highest the overnight rate has been since April 2001.

“Based on the accumulation of evidence, Governing Council decided to increase the policy interest rate, reflecting our view that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the two per cent target,” the Bank said in a news release announcing its decision.

The Bank cited higher than expected GDP growth, and a tight labour market.

“Higher immigration and participation rates are expanding the supply of workers but new workers have been quickly hired, reflecting continued strong demand for labour,” the Bank said.

Most forecasters believed the central bank wouldn’t raise its rate this week.

Last March, the bank began an aggressive rate-hike campaign in a bid to drive inflation down, pushing its key overnight rate to 4.5 per cent from 0.25 per cent.

The theory is that by making it more expensive to borrow money, consumers — and businesses — will spend less, driving prices down, and also slowing the economy.

In January, a hike of 25 basis points (a quarter of a percentage point) came with a statement from bank governor Tiff Macklem that it was pausing hikes — at least temporarily.

But a steady stream of stronger than expected economic data — including rising inflation in April — put an increase back on the table.

Canada’s gross domestic product grew at an annualized rate of 3.1 per cent in the first quarter, substantially more than the bank had expected. In April, Canada’s annual rate of inflation rose for the first time since last June, hitting 4.4 per cent. There have also been several straight months of stronger than expected job growth.

While inflation has fallen from the 8.1 per cent it peaked at last June, it’s still substantially higher than the bank’s target of two per cent."

Source: https://rb.gy/lr3u3