The Bank of Canada is set to deliver its fifth, but possibly final, interest rate hike this week amid signs that efforts to combat inflation may be dragging the country’s economy into recession. Markets are pricing in a 75-basis-point increase in the overnight interest rate for the central bank at its decision Wednesday, Oct. 26, 2022, at 10 a.m. in Ottawa. That would take the benchmark to 4%, a level not seen since March 2008. The central bank, led by Governor Tiff Macklem, has signaled its intention to continue tightening policy until it sees “clear evidence” inflation has started to return to its 2% target from around 7% currently. But there are limits to how far borrowing costs can go given Canada’s high level of household debt. Investors will be watching for any hints from Macklem that the end of his hiking cycle is near.bank of canada Policy makers have grown increasingly concerned about the growing financial stability risks associated with higher interest rates. There is also speculation that Federal Reserve Chairman Jerome Powell will begin planning a reduction in the size of the hikes after an expected three-quarter-point increase next week. Three weeks ago, Australia's central bank surprised markets when it delivered a quarter-point hike, ending a series of half-point moves and becoming the first major central bank to break into the rankings.



Markets anticipate the Bank of Canada will follow Wednesday’s big hike with two smaller 25-basis-point increases in the coming months, before pausing altogether.bank of canada “The economy is running at this point,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in an email. Until now, Macklem has been wary of hinting at a shift in focus. In two public appearances since Australia’s pivot, he has emphasized inflation as a bigger concern than the economic slowdown, in part because near-term expectations have moved higher. In a survey of households released this month, the central bank said Canadians still see inflation in two years at 5.2% — well above the upper end of its 1% to 3% control range.bank of canada That’s a big deal for Macklem and his officials. The more businesses and households believe inflation will stay high, the more likely it is to happen. That’s why he engineered an unprecedented sequence of super-large rate moves to quickly throttle demand and show he means business. The bank moved with half-point increases in April and June, a full percentage point in July and 75 basis points in September. In total, officials have raised borrowing costs by three percentage points since March, bringing the overnight interest rate to 3.25%.bank of canada You can continue to update Bank of Canada news, which is high-impact data, through the GIC Journal every day. In addition to high-impact data, you can also access technical and fundamental analyses together in the GIC Journal. Make sure to trade at GIC with a minimum deposit of IDR 150,000!