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Bank of Canada expected to hike interest rates for the eighth straight time

The Bank of Canada announces Wednesday morning whether it’s raising its key overnight lending rate for the eighth straight time as it attempts to battle inflation.

It will also release its quarterly analysis of the state of the Canadian economy, and for the first time ever, will publish minutes of its internal debate that led to Wednesday’s decision.

Markets are predicting a 25 basis-point (quarter of a percentage point) hike. Overnight “swap” trading is predicting a 75 per cent likelihood of a 25 basis-point hike.

In an attempt to get inflation under control, the Bank raised the overnight lending rate seven times in 2022, most recently bumping it by 50 basis points (half a percentage point) to 4.25 per cent in early December.

The overnight rate began last year at 0.25 per cent, where it had been since the Bank dropped it three times in one month in March 2020, as the global COVID-19 pandemic was declared.

The theory is that by making it more costly to borrow money, people will spend less, eventually driving prices down.

Following the 10 a.m. rate announcement, for the first time ever, the Bank will also be releasing minutes of its internal debate on what led to Wednesday’s decision.

A survey released last week by the Bank of Canada found consumers are keeping a wary eye on their spending because they expect inflation to keep soaring.

The survey found that a majority of Canadians are expecting a “mild to moderate” recession over the next 12 months.

The survey found that Canadians have reduced their spending on a wide variety of goods and services in response to interest rate hikes and inflation, and a growing share expect to keep cutting back.

A business confidence survey by the Bank also found companies are pulling back on plans because they expect sales to slow. According to the business outlook survey, two-thirds of firms expect a recession in the next 12 months.


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