Wednesday, September 7, 2022

The Bank of Canada raised its benchmark interest rate today, three-quarters of a percentage point and signaled that the key rate “will need to rise further” to tackle high levels of inflation.

The central bank’s policy rate now stands at 3.25 per cent.

This marks the fifth rate hike so far in 2022 — Canada’s key interest rate sat at just 0.25 per cent in January.

why is the rate being raised?

The Bank of Canada raises interest rates in an effort to take steam out of the Canadian economy and discourage consumer spending demand, dampening domestic fuel for inflation.

Global inflation remains high and measures of core inflation are moving up in most countries. In response, central banks around the world continue to tighten monetary policy. Economic activity in the United States has moderated, although the US labor market remains tight. China is facing ongoing challenges from COVID shutdowns. Commodity prices have been volatile: oil, wheat and lumber prices have moderated while natural gas prices have risen.

The Canadian economy continues to operate in excess demand and labor markets remain tight. Canada’s GDP grew by 3.3% in the second quarter. While this was somewhat weaker than the Bank had projected, indicators of domestic demand were very strong – consumption grew by about 9½% and business investment was up by close to 12%.


With higher mortgage rates, the housing market is pulling back as anticipated, following unsustainable growth during the pandemic. The Bank continues to expect the economy to moderate in the second half of this year, as global demand weakens and tighter monetary policy here in Canada begins to bring demand more in line with supply.

The next announcement is expected October 26, 2022.

Read the full Bank of Canada press release here.