The country’s benchmark interest rate is rising half a percentage point, the Bank of Canada announced Wednesday, the first time it has raised rates by more than 25 basis points in more than two decades.
The central bank’s key overnight rate now stands at one per cent. This is the second consecutive interest rate hike in 2022, after the Bank of Canada increased rates by 25 basis points in March, breaking a period of steady rates held at historic lows over the course of the COVID-19 pandemic.
The central bank signalled more rate hikes are coming through the year to tamp down on inflation, which it now expects to be higher than initially projected through the first half of 2022.
The Bank of Canada says the spike in energy and other commodity prices in the wake of Russia’s invasion of Ukraine are driving inflation higher than its earlier expectations.