Bank of Canada raises key lending rate to 3.75%

Interest rates likely to rise further to tame inflation

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Reuters

By Reuters

Published: Wed 26 Oct 2022, 6:49 PM

The Bank of Canada announced a smaller-than-expected interest rate hike on Wednesday and made clear more increases were still needed, even as it forecast that the economy could soon slip into a slight recession.

The central bank increased its policy rate by half a percentage point to 3.75%, a 14-year high but coming up short on calls for another 75 basis points move. It has lifted rates by 350 basis points since March, one of its fastest tightening cycles ever.

The bank separately said growth would stall later this year and early next year, edging down its 2022 economic outlook to 3.3% from 3.5% forecast in July, and slashing 2023 growth to 0.9%, from 1.8%.

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"This suggests that a couple of quarters with growth slightly below zero is just as likely as a couple of quarters with small positive growth," the bank said in its October Monetary Policy Report.

A technical recession, two consecutive quarters of negative growth, is possible between the fourth quarter of 2022 and the end of the second quarter of 2023, the forecasts show.

Reuters

Published: Wed 26 Oct 2022, 6:49 PM

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