Another rate hike could be on the cards for the Bank of Canada, and experts predict it could be a heavy one.
The Bank of Canada has raised its key interest rate five times this year, with the latest increase just last month.
On September 7, the central bank announced that it was raising the rate to 3.25% in an effort to combat inflation. This increased by 0.75% from the institution’s full percentage point increase in July to 2.5%. This was the largest increase since 1998.
Late last week, Bank of Canada’s former governor, Mark Carney, told a Senate committee that Canada was likely headed for a recession, citing “difficult economic times.”
With recession fears looming over their heads, Canadians are even more anxious about a sixth rate update. Rent across the country is becoming more unaffordable, and a mortgage rate hike could add fuel to the fire. Economists sound the alarm.
A recent report by the Organization for Economic Co-operation and Development (OECD) already expects the Bank of Canada to raise its rate to 4.5% by 2023 – higher than the expectation of an absolute ceiling of 4% in the current hike cycle . This will amount to at least another 0.75% increase over the coming months.
OECD has warned that such a sharp increase will be needed to bring rampant inflation further under control, including reducing economic demand to put a real damper on rising labor costs due to the huge labor shortage.
With files from Ty Jadah and Kenneth Chan of Daily Hive