Reaction to the Bank of Canada's 100-bps shocker - Mortgage Rates & Mortgage Broker News in Canada
Reaction to the Bank of Canada's 100-bps shocker - Mortgage Rates & Mortgage Broker News in Canada
Abstract
Having been behind the inflation curve for many months, the Bank of Canada today tried to get ahead of it by delivering a surprise 100-bps rate hike. In its accompanying statement, the Bank said it decided to "Front-load the path to higher interest rates," because inflation is "Higher and more persistent" than the Bank expected. The Banks also said it expects inflation to remain at around 8% "In the next few months." In a press conference following the rate decision announcement, Bank of Canada Governor Tiff Macklem said the Bank's goal is to get inflation back to its 2% target with a "Soft landing" for the economy. "We expect interest rates will need to rise further to cool demand and bring inflation back to target and by front-loading our interest rate response, we are trying to avoid the need to increase interest rates even further." The move came on the same day that U.S. inflation data recorded a rise to 9.1%, its highest level since 1981. Reaction to the Bank's "Super-sized" rate hike Reaction to the Bank's surprise move was swift. RBC's Josh Nye said economists aren't likely to disagree with the Bank's decision today. "Tougher medicine will be needed to get inflation under control and we look for the policy rate to rise to a restrictive 3.25% by October." TD Bank senior economist James Orlando said today's move raises the risk that the economy falls into recession, but that the Bank "Has to accept this risk" to prevent high inflation expectations from becoming even more entrenched.