Bank of Canada raises interest rate by half-percentage point

OTTAWA — The Bank of Canada hiked its key interest rate by half of a percentage point today and said rates will need to rise further to clamp down on decades-high inflation.

Since March, the central bank has raised its key interest rate from 0.25 per cent to 3.75 per cent, making it one of the fastest monetary policy tightening cycles in its history.

Economists were split on whether the Bank of Canada would go with half or three-quarters of a percentage point hike ahead of today’s decision.

The Bank of Canada is forecasting inflation will slow to three per cent by the end of 2023 before getting back to its two per cent target in 2024.

Canada’s annual inflation rate dropped slightly in September to 6.9 per cent but the cost of groceries continues to climb.

As fears of an impending recession grow, the central bank says it expects economic growth to stall toward the end of the year and into the beginning of 2023 before rebounding.