Bank of Canada hikes key interest rate half a point to 1%

The Bank of Canada has raised its key interest rate by the highest amount in more than 20 years and warns more rate hikes are coming.

The governor of the Bank of Canada said Wednesday’s interest rate hike won’t be the last.

“Canadians should expect interest rates to continue to increase to more normal settings, within the range of neutral range of interest that doesn’t stress or stimulate the economy.”

Marvin Ryder from the DeGroote School of Business said the bank has raised the price of lending two times in the last two months in an attempt to bring rates back to pre-pandemic levels.

“Bank of Canada cut their overnight lending rate to the lowest rate in Canadian history. 0.25% because they wanted money to be plentiful. We knew we were going to be in some difficult times.”

As a result, with major COVID restrictions lifted, Canadians have been spending, almost to our detriment.

“Consumer demand for products went up and the businesses that wanted to supply them couldn’t keep up with your demand this is where we got the supply chain. We couldn’t match what you wanted with the supply. Whenever that happens, whenever demand outstrips supply prices go up,” Ryder said.

The Bank of Canada’s next interest rate decision is in June and while it’ll keep an eye on how this hike affects the economy, it’ll also monitor what’s happening in Ukraine.

Ryder said that even if peace in Ukraine is declared tomorrow, the sanctions on Russia won’t be lifted.

“Ukraine has to rebuild. We may be seeing a new iron curtain with Russia. In other words, we may just stop our relations with Russia. Not just for this year, but for many, many more years into the future. What does that mean economically, frankly? We don’t know.”

Banks have started posting variable lending rates for mortgages at just over 3% effective Thursday.