Canada raises key rate for the sixth time in a year
Residents of the country have to pay more on loans and mortgages again.
On October 26, the Bank of Canada once again raised its key interest rate to curb inflation. It rose by 50 points at once and now stands at 3.75%. This is the sixth time in 2022 that Canada has raised its key rate. The key rate directly affects interest rates on loans and mortgages as well as bank deposits.
This year, inflation in Canada has reached its highest level in decades. It is now estimated at 6.9%. This is twice the rate the Bank of Canada is aiming for.
In the long run, a rate hike is expected to lower the cost of living by forcing Canadians to spend less money and take out less credit. Right now, however, a high key rate combined with inflation is painful for companies and consumers alike. For example, those with floating mortgage rates will pay $1,300 CAD more per year for a $400,000 CAD property.
"There are no easy ways to restore price stability," says Bank of Canada Governor Tiff Macklem. — If we don't do enough, Canadians will continue to suffer the hardships of high inflation."
Some experts and investors expected the rate to rise by 75 points, not 50. Nevertheless, it is too early to say that this is the last increase. At least one more 50-point rate hike is expected in the future, then the rate can remain at the same level until at least the end of 2023.
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