Canada’s central bank raised interest rates to their highest since 2008 and laid the groundwork for a potential pause in its monetary policy tightening campaign after policymakers acknowledged recent increases had helped cool domestic demand.
The Bank of Canada on Wednesday lifted its overnight rate 0.50 percentage points to 4.25 per cent, marking the seventh meeting in a row at which it has raised benchmark borrowing costs. A slight majority of economists expected the central bank to match the size of its most recent rate rise in October, although financial markets bet on a 0.25 percentage point increase.
In a statement accompanying its decision, the BoC said “it will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance”, a pivot from previous statements this year that have asserted the need for more increases. This follows remarks from governor Tiff Macklem at the BoC’s October rate announcement that the bank was near the end of its tightening cycle.