Bank of Canada raises interest rates

On Wednesday, Bank of Canada Governor Tiff Macklem spoke in the House of Commons. According to Macklem, inflation in Canada is strong and higher interest rates will be needed in order to cool the overheated economy.

Macklem said that inflation has been brought down in recent months, however, price pressures have not eased yet. The Bank of Canada (BOC) is approaching the tightening phase, but has not yet reached it.

Tiff Macklem told MPs that the BOC is seeking to return inflation back to its target. Inflation is expected to remain fairly high until the end of this year.

Last month, the Bank of Canada raised rates by 50 basis points. It predicts that rate increases will stop from the fourth quarter of 2022 until mid-2023.

Money markets have fully discounted 25 basis points of further tightening adopted on December 7th at the Bank of Canada's next policy decision. Markets believe there is a 20% chance of a 50 basis point hike.