BoC MAY HIKE ITS KEY RATE TO 3% OR HIGHER TO HARNESS INFLATION

Jun 02, 2022

By Bob Komsic

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The day after Canada’s central bank raised its benchmark interest rate to 1.5%, the deputy governor says Canadians may soon be seeing double.
The Bank of Canada’s second-in-command says the bank may need to hike the rate to 3% or even higher to ensure inflation does not become entrenched.
Paul Beaudry says the likelihood of even higher consumer prices means the bank might just have to push its policy rate at least to the high end of its ”neutral” range of between 2-3%.
He points out supply chain disruptions during COVID-19 lasted longer than anticipated, made worse by unexpected events such as the invasion of Ukraine and lockdowns in China, resulting in a scramble to get a lid on prices.
Beaudry says some Canadians already feel inflation’s feeding on itself, but he insists higher interest rates will bring demand and supply into balance and ease inflationary pressures.
The annual pace of inflation rose to 6.8% in April – the faster year-over-year rise in 31-years.
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