Bank of Canada Rate Announcement - June 1, 2022
June 1, 2022 | Posted by: Ken Fadel
To no one’s surprise, the BoC just increased it’s target benchmark rate 50 bps to 1.50%. While the 50-basis-point hike was expected, the language in the BoC’s statement suggests policy makers are considering a faster pace of tightening than they had been suggesting. Markets are currently pricing in another 50 bps increase for the July 13th meeting, before the pace of tightening slows in the latter half of the year. Current estimates have the BoC ending up around the 3% mark to remove the stimulative effect on the economy.
The BoC stated it “is prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target,” as inflation hit a 30 year high of 6.8% in April.
The back-to-back 50 bps increases are without precedent since the BoC began adjusting monetary policy at fixed decision dates in 2000.
Policy makers conceded that inflation is rising faster than their April forecasts and “will likely move even higher in the near term before beginning to ease.”
The BoC also remarked that housing market is “moderating” from “exceptionally” elevated levels of activity, while noting that consumer spending remains robust.