As expected, the Bank of Canada raised the policy rate 25 basis points on Wednesday, June 7.
“The Bank of Canada today increased its target for the overnight rate to 4¾%, with the Bank Rate at 5% and the deposit rate at 4¾%. The Bank is also continuing its policy of quantitative tightening.” -Bank of Canada
The speculation in days leading up to the June 7 rate announcement had most economists betting on a likely rate hike (ie Western Standard, Storeys, Financial Post, & CBC News), due to the stronger than expected consumer spending in Canada, the recent uptick in inflation, and the underlying global inflation rate.
‘Canada’s economy was stronger than expected in the first quarter of 2023, with GDP growth of 3.1%. Consumption growth was surprisingly strong and broad-based, even after accounting for the boost from population gains. Demand for services continued to rebound. In addition, spending on interest-sensitive goods increased and, more recently, housing market activity has picked up. The labour market remains tight: higher immigration and participation rates are expanding the supply of workers but new workers have been quickly hired, reflecting continued strong demand for labour. Overall, excess demand in the economy looks to be more persistent than anticipated.”
The next Bank of Canada announcement will be on July 12, 2023.