Bank of Canada will continue to tighten monetary policy

As a measure to slow down the domestic economy and reduce inflation from four-decade peaks, the Bank of Canada is planning another increase in the key rate, the fourth in recent times.

Some economists surveyed by Bloomberg believe in an overnight interest rate hike of at least 50 basis points, while others expect politicians led by Governor Tiff Macklem to increase the rate by 75 basis points.

Along with giants such as Goldman Sachs and JP Morgan, Canada's six major commercial banks are voting for a more substantial rate hike. Among the minority in favor of a 0.5% increase are UBS and Moody's.

The current interest rate hike cycle is recognized as one of the most aggressive in the history of the bank. Back in March, the key rate was at the level of 0.25%, and its first increase by a quarter of a point turned out to be smooth and expected. However, later it was replaced by a sudden jump of 100 basis points. As a result, already in July, the value of the interest rate reached 2.5%.

In a report to investors dated September 02, Royal Bank of Canada economists Nathan Janzen and Claire Fan made a statement that in order to return inflation to the bank’s target level of 2%, household demand should continue to be reduced. However, they said, with the softening in household demand and inflationary pressures, the tightening cycle may be stopped by the bank soon.

The decision of the Bank of Canada will be known on Wednesday at 10:00 in Ottawa, then the final statement is expected. At the same time, a press conference and new economic forecasts are not planned.