BoC raises the overnight rate target by 75bps to 3.25%. Correspondingly, the Bank Rate and deposit rate are now at 3.50% and 3.25% respectively. Hawkish bias is maintained as the Governing Council “still judges that the policy interest rate will need to rise further.”
“As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target,” BoC added.
BoC also noted that core inflation “continued to move up” with data indicating a “further broadening of price pressures, particularly in services”. It warned, “the longer this continues, the greater the risk that elevated inflation becomes entrenched.”
The economy “continues to operate in excess demand and labour markets remain tight”. BoC expects the economy to “moderate in the second half of this year, as global demand weakens and tighter monetary policy here in Canada begins to bring demand more in line with supply.”