On Wednesday, the Bank of Canada rasied the interest rate by 50 points, the highest level in nearly 15 years, last seen in January 2008.
Over nine months, the central bank has hiked the rate by 400 points to 4.25%, due to rising inflation, strong growth and tight labour markets.
In the third quarter, the gross domestic product (GDP) grew stronger than expected by 2.9%. But, the central bank forecasts that growth will stall through the middle of next year.
“While the tightening cycle likely has reached its zenith, we’ll need the pain of these higher rates to persist for a while to stall economic growth and thereby cool inflation.”
– Avery Shenfeld, Chief Economist at CIBC Capital Markets
In October, inflation hit 6.9% which “is still too high,” but indicates inflation is on the decline and that “price pressures may be losing momentum”.
