As predicted, the Bank of Canada increased interest rates on Wednesday to their highest level in 14 years. Since rates have risen over the BoC’s neutral level, monetary policy is now likely to stifle growth for the first time in about 20 years.
The central bank has come under heavy fire for last year’s dismissal of high inflation as “transitory.” From 8.1% in June to 7.6% in July, inflation decreased, but this drop was mostly brought on by lower fuel costs.
The policy rate is expected to grow by two further quarter-percentage points this year, reaching 3.75% in December, according to the money markets. The likelihood of persistently high inflation increases as time goes on, according to the Bank of Canada.