Why did the Central Bank of Canada raise rates?
Representatives of the Bank explained the decision of the management.
On Thursday, Central Bank of Canada officials explained why they raised the rate to a record 4.75%. The main goal is to curb inflation. The Bank had previously successfully curbed it, but then prices started rising again. Because of this, Canadian household spending increased more than economists expected. In addition, rental prices are rising.
The Central Bank of Canada aims to keep inflation at 2%. At the moment it stands at 4.4%. Canada's economy, however, continues to grow, as does GDP. Inflation has not halted economic growth and has not done much damage to industry. It has hit hardest the prices of food, medicine and rent: the things every Canadian needs. A ton of iron or graphite barely changed in value, but bread and meat may cost 10 per cent more. The central bank raised the interest rate to stop the price of the essentials from rising. Perhaps it will raise it again in early July.
Economists expect inflation to fall to 3% by the end of the summer and meet immediate needs more easily. However, they ask Canadians not to relax and watch their spending, and to plan ahead for big purchases. They also urge Canadians to regularly save for retirement.
Political tensions around the world and the war in Ukraine could create contingencies for Canada's economy. No expert can guarantee that everything will go as planned. Therefore, the Central Bank of Canada is now urging businesses and other Canadians to prepare for a period of higher rates. Fortunately, Canadians won't have to give up meaningful acquisitions, just that they will take longer. For example, a Toronto real estate expert advises to prepare to buy your own home for 1-2 years.
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