Canada central bank hikes key lending rate 50 basis points to 4.25%

Canada central bank hikes key lending rate 50 basis points to 4.25%

The Bank of Canada said economic growth was stronger than expected in the third quarter
The Bank of Canada said economic growth was stronger than expected in the third quarter. Photo: Nicholas KAMM / AFP/File
Source: AFP

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Canada's central bank on Wednesday hiked its key lending rate by 50 basis points to 4.25 percent, saying its aggressive moves to rein in inflation were working but that the economy was still too hot.

The Bank of Canada said economic growth was stronger than expected in the third quarter, bolstered by robust commodity exports.

But in a statement hinting that this was likely to be its last rate hike for now, it said "there is growing evidence that tighter monetary policy is restraining domestic demand."

It pointed to consumption slowing as the year's end approaches, a pullback in the housing market and other data that suggested "growth will essentially stall through the end of this year and the first half of next year."

Looking ahead, the bank said its governing council would be "considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target."

The language was softer than in previous notices that warned bluntly of more interest rate increases to come.

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Inflation remained at 6.9 percent in October, with many of the goods and services Canadians regularly buy having increased in price.

Although "price pressures may be losing momentum," the bank said inflation "is still too high and short-term inflation expectations remain elevated."

The bank will need to assess whether its seven rate hikes this year have slowed demand as hoped, how supply challenges are resolving, and whether all of this is impacting inflation.

The bank is mandated to try to keep inflation at about 2.0 percent.

Source: AFP

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