The Bank of Canada raised its benchmark interest rate to 0.5 per cent on Wednesday, a move that’s expected to be the first of a series of small rate hikes this year in an attempt to tame inflation that has risen to its highest point in decades.
It’s the first time the bank has raised its rate since 2018.
The Bank of Canada’s rate affects the rates that Canadian consumers get on things like mortgages, lines of credit and savings accounts at their own banks.
While the bank has been telegraphing its plans to raise its rate to fight inflation for a while now, the bank acknowledged in its announcement Wednesday that inflation is heating up even faster than anticipated.
The bank cited news this week that Canada’s economy grew at a 6.7 per cent annual pace in the last quarter of 2021, a figure that the bank described as “very strong.”
“This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed.”
The bank also cited factors beyond Canada’s borders as reasons for its move.
“Economies are emerging from the impact of the Omicron variant of [coronavirus] more quickly than expected,” the bank said.
Ukraine situation a factor
And the bank cited the ongoing invasion of Ukraine as yet another factor that could influence inflation, or other parts of Canada’s economy.
Among other things, Russia’s unprovoked attack on its neighbour has caused the price of commodities like fertilizer, natural gas and oil to skyrocket, as the country is a major producer of these items.
Canada is one of many countries that have pledged to no longer import oil from Russia, but one of the impacts of that move is to cause the price to spike. The price of the North American crude oil benchmark known as West Texas Intermediate topped $111 a barrel on Wednesday, its highest price in eight years.
That drives up the price for energy that all Canadian consumers and businesses need, which will further contribute to inflation.
“The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities,” the bank said. “All told, inflation is now expected to be higher in the near term than projected in January.”
TORONTO – Ontario is pushing through several bills with little or no debate, which the government house leader says is due to a short legislative sitting.
The government has significantly reduced debate and committee time on the proposed law that would force municipalities to seek permission to install bike lanes when they would remove a car lane.
It also passed the fall economic statement that contains legislation to send out $200 cheques to taxpayers with reduced debating time.
The province tabled a bill Wednesday afternoon that would extend the per-vote subsidy program, which funnels money to political parties, until 2027.
That bill passed third reading Thursday morning with no debate and is awaiting royal assent.
Government House Leader Steve Clark did not answer a question about whether the province is speeding up passage of the bills in order to have an election in the spring, which Premier Doug Ford has not ruled out.
This report by The Canadian Press was first published Nov. 7, 2024.
