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Canada Central Bank Raises Key Lending Rate To 3.75%

Canada to stop funding research with foreign risks to national security

The Bank of Canada on Wednesday announced a fifth major interest rate increase to 3.75 percent, amid warnings that its fight against inflation may trigger a recession.

It also signalled that the 0.5 percentage point hike would not be the last following a blistering pace of increases to its benchmark rate from a historic low in recent months, saying in a statement that rates “will need to rise further.”

The bank increased in half-point increments its key lending rate in April and June, before hiking it a full percentage point in July and 75 basis points in September.

Including a small increase in March that started all of this tightening, the total cost of borrowing has increased by 3.50 percentage points this year.

That has provoked rare criticism from opposition lawmakers concerned about adding to Canadians‘ cost of living woes.

On Tuesday, Finance Minister Chrystia Freeland, while acknowledging those concerns, defended the central bank’s independence as it prepared for another hike.

“Inflation is too high. Life is really tough for a lot of people, and rising interest rates are posing another set of challenges,” she told reporters, while vowing targeted relief for those most in need.

The bank, which forecast inflation to fall back to its 2.0 percent target by the end of 2024, noted prices for goods and services around the world remain “high and broadly based.”

“This reflects the strength of the global recovery from the pandemic, a series of global supply disruptions, and elevated commodity prices, particularly for energy, which have been pushed up by Russia’s attack on Ukraine,” it said.

The strength of the US dollar is also adding to inflationary pressures, it said.

But as economies slow and supply disruptions ease, global inflation will come down, the bank predicted.

At home, a labor shortage is contributing to the economy’s inability to meet strong demand for goods and services, “putting upward pressure on domestic inflation,” it said.


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Agence France-Presse (AFP) is a French international news agency headquartered in Paris, France. Founded in 1835 as Havas, it is the world's oldest news agency.

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