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Bank of Canada raises key interest rate 50 basis points as inflation fight ramps up

Global News 2022-10-26 Craig Lord
The Bank of Canada is shown in Ottawa on Tuesday, July 12, 2022. THE CANADIAN PRESS/Sean Kilpatrick © skp The Bank of Canada is shown in Ottawa on Tuesday, July 12, 2022. THE CANADIAN PRESS/Sean Kilpatrick

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The Bank of Canada raised its key interest rate by half a percentage point on Wednesday in an effort to further tame decades-high inflation.

The move marks the sixth consecutive rate hike by the central bank this year. Since March, the Bank of Canada has raised its key interest rate to 3.75 per cent from 0.25 per cent, making it more expensive for Canadians and businesses to borrow money.

Most economists had expected an interest rate hike, but many were calling for a larger 75-basis-point step.

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While overall inflation slowed to 6.9 per cent last month as gas prices fell, the central bank has since signaled more rate hikes are needed to get inflation back to its target of two per cent.

The Bank of Canada said in a statement accompanying its rate hike that higher interest rates, an easing in the global supply chain and lower commodity prices are expected to bring inflation down to three per cent by the end of next year and back to the two per cent target by the end of 2024.

But the central bank also said Wednesday that its preferred measures of core inflation are "not yet showing meaningful evidence that underlying price pressures are easing."

Thanks to elevated inflation expectations and "ongoing demand pressures in the economy," the bank's governing council said it expects the policy rate will still "need to rise further."

More to come.

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