Wednesday, December 7, 2022

The Bank of Canada has raised its overnight rate by 50 basis points to 4.25 per cent, marking its seventh rate hike in nine months. The last time the bank’s policy rate was this high was in January 2008.

The move was widely expected by economists, who were anticipating a rate hike of either 25 or 50 points.

The inflation rate remained high at 6.9 per cent in October, well above the bank’s 2 per cent target. Higher gas prices put upward pressure on the cost of most goods and services, according to the Consumer Price Index released by Statistics Canada last month.

why is the rate being raised?

Inflation around the world remains high and broadly based. Global economic growth is slowing, although it is proving more resilient than was expected at the time of the October Monetary Policy Report (MPR). In the United States, the economy is weakening but consumption continues to be solid and the labour market remains overheated. The gradual easing of global supply bottlenecks continues, although further progress could be disrupted by geopolitical events.

In Canada, GDP growth in the third quarter was stronger than expected, and the economy continued to operate in excess demand. Canada’s labour market remains tight, with unemployment near historic lows. While commodity exports have been strong, there is growing evidence that tighter monetary policy is restraining domestic demand: consumption moderated in the third quarter, and housing market activity continues to decline. Overall, the data since the October MPR support the Bank’s outlook that growth will essentially stall through the end of this year and the first half of next year.

CPI inflation remained at 6.9% in October, with many of the goods and services Canadians regularly buy showing large price increases. Measures of core inflation remain around 5%. Three-month rates of change in core inflation have come down, an early indicator that price pressures may be losing momentum. However, inflation is still too high and short-term inflation expectations remain elevated. The longer that consumers and businesses expect inflation to be above the target, the greater the risk that elevated inflation becomes entrenched.

Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target. Governing Council continues to assess how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding. Quantitative tightening is complementing increases in the policy rate. We are resolute in our commitment to achieving the 2% inflation target and restoring price stability for Canadians.


This is a huge impact on the rates that Canadian consumers and businesses get from their banks on things like savings accounts and mortgages.

In previous rate hikes, the bank made it clear that it would continue to raise its trend-setting rate until inflation came back to within the range of up to three per cent that it targets. As recently as October, the bank was saying it “expects” that rates will have to go even higher.

The bank and its policy makers “will be considering” whether or not the rate has to go higher in order to bring supply and demand back into balance and return inflation to target.


Oct. 24, 2018: The Bank of Canada’s key interest rate reached 1.75 per cent after gradually increasing since the 2015 oil price crash that rippled through the Canadian economy. That rate remained unchanged throughout 2019.

March 4, 2020: The Bank of Canada cut its key interest rate by half a percentage point to 1.25 per cent amid economic concerns stemming from COVID-19, just days before the World Health Organization declared a global pandemic.

March 13, 2020: The Bank of Canada announced that it would lower its overnight rate target by another half percentage point to 0.75 per cent, effective March 16, in a rare unscheduled announcement. At the time, the central bank called the decision a “proactive measure” in response to the pandemic worsening, as well as the significant drop in oil prices.

March 27, 2020: The Bank of Canada lowered its key interest rate to 0.25 per cent, a record low, and launched a quantitative easing program (or government bond-buying program) to further stimulate the economy as COVID-19 continued to spread around the world.

Oct. 27, 2021: With the economy showing signs of new life and COVID-19 restrictions lifting, the Bank of Canada announced it was ending its quantitative easing program.

March 2, 2022: After keeping its key interest rate at 0.25 per cent for two years, the Bank of Canada raised it to 0.50 per cent. This came amid stubbornly high inflation and an increasingly volatile global economic landscape driven by Russia’s invasion of Ukraine.

April 13, 2022: The Bank of Canada further hiked its key interest rate by half a percentage point to one per cent. The last time the central bank raised the overnight target rate by half a percentage point rather than a quarter was in May 2000.

June 1, 2022: At the start of this summer, The Bank of Canada raised its key interest rate by another half of a percentage point to 1.5 per cent — the fastest year-over-year rise in more than three decades, to rein in a higher than expected inflation rate of 6.8 per cent.

July 13, 2022: As projected, another hike came later in the summer as the Bank of Canada raised its key interest rate by a full percentage point, marking the largest single rate hike since August 1998.

Sept. 7, 2022: For the fifth consecutive hike this year, the Bank of Canada rose its key interest rate to 0.75 per cent, to a total of 3.25 per cent — the highest key rate since May 2008. After the hike, in an Oct. 6 speech, Bank of Canada governor Tiff Macklem said there is more to be done.

Oct 26, 2022: The Bank of Canada hiked its key interest rate by half of a percentage point to 3.75 per cent. The central bank said rates will need to rise further to clamp down on decades-high inflation. Earlier in the year, economists were expecting the rate hike cycle to be completed by October.


Read the full Bank of Canada press release here.


The announcements scheduled for 2023 are as follows:

  • January 25, 2023
  • March 8, 2023
  • April 12, 2023
  • June 7, 2023
  • July 12, 2023
  • October 25, 2023
  • December 6, 2023