On Wednesday, the Bank of Canada announced that it would raise the benchmark interest rate by 25 basis points, in line with market expectations, which is the first time since April 2001 that the benchmark interest rate of the country has reached 5%.
The June Labor Force Survey released by Statistics Canada last week showed that the country added 60000 jobs last month, showing no signs of economic slowdown.
After the news was announced, experts disagreed on whether the Bank of Canada is expected to raise interest rates again after the summer.
Desjardins economist Royce Mendes wrote in a report, "Although the Central Bank of Canada has not closed the door of monetary tightening policy, Canadians may finally see the end of some interest rate increases".
At the same time, Andrew Grantham, an economist at CIBC, wrote that "the continued hawkish tone in today's statement indicates that the risk is biased towards another interest rate hike after the summer".
Wednesday's interest rate hike is the 10th interest rate hike by the central bank since March 2022. The central bank suspended interest rate hikes for several months in January to determine whether the economy has cooled sufficiently, and then resumed interest rate hikes in June.
The bank wrote in its press release that "global inflation is easing, energy prices are falling, and commodity price inflation is falling. However, strong demand and tight labor market are causing sustained inflationary pressure in the service industry".
The bank pointed out in its report that the resilience of the Canadian economy exceeded expectations. The bank's updated forecast shows that it will take longer than previously expected to achieve the 2% inflation target.
Although the interest rate hike is intended to curb consumer spending, the report points out that "excess demand" still exists, including the retail industry. The growth of Canada's population has promoted employment growth, spending and housing demand.
As of May, Canada's inflation rate slowed to 3.4%.
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