Bank of Canada announces 1% rate hike

The Bank of Canada announced a 1% interest rate hike after its meeting on Wednesday night, pushing its official interest rate to 2.5%. The market had expected the Bank of Canada to add only 75 basis points. In its statement, the Bank of Canada pointed out that the local economy is showing obvious excess demand, and prices are not only high but also spreading. Businesses and consumers generally expect inflation to continue to rise, and there is a chance that it will remain high for a long time. For these reasons, the bank must raise interest rates decisively to prevent inflation from rising further. The Bank of Canada has always emphasized a "nominal neutral rate," which means interest rates are at a level that neither stimulates nor contracts the economy. According to the Bank of Canada, this interest rate level is between 2% and 3%.