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Bank of Canada Hikes Interest Rates to the Highest Level in 22 Years

The Bank of Canada surprised some when it resumed its monetary tightening policy, increasing its benchmark interest rate by 25 basis points to 4.75%; the highest level since May 2001. This is also the first time that the Bank of Canada has raised its key lending rate since January.

At the start of the year the central bank announced its eight straight rate hike but Bank of Canada governor Tiff Macklem said the central bank would be pausing further rate hikes. This led some to erroneously believe the central bank would start cutting interest rates later this year.

Macklem put that optimism to rest by saying the Bank of Canada could still raise rates if it needs to in order to get stubbornly high inflation under control and heading down to its two percent target.

Still, the bank kept interest rates steady over the last two rate announcements at 4.5% while it took a wait and see approach to whether higher borrowing costs were high enough to curb spending and bring inflation down.

Inflation isn’t falling quickly enough it seems, with the central bank calling an end to its “conditional pause.” After nine months of declines, Canada’s inflation rate unexpectedly jumped to 4.4% in April.

Economic data shows the Canadian economy is quite resilient with strong Canadian consumer spending, tight labour market, and a big rebound in the housing market, more than enough to force an interest rate hike.

Will the Bank of Canada Raise Interest Rates Again in 2023?

The unexpected interest rate hike has many questioning whether even more rate hikes are on the way. Some investments have already priced in at least one more rate hike before the end of the year, which could take interest rates to 5.25% or higher.

Chances are good another rate hike is coming. Part of the problem is, it takes a while for monetary policy tightening to hit the economy. As a result, Canadians haven’t felt the full impact of higher interest rates yet. And its unlikely we’ll see enough movement on inflation before the next scheduled interest rate announcement in July.

Persistently high inflation means everything from groceries to gas to insurance and other day-to-day items and things we do will remain expensive. For consumers, rising interest rates means it will cost more to pay their debt, especially rate sensitive debt like variable rate mortgages, home equity lines of credit, car loans, and credit cards. For businesses, rising interest rates makes it more expensive to borrow, which discourages spending and could help tip the economy into a recession.

Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses

How will rising interest rates impact the Canadian economy and stock market? As Canada’s oldest and leading provider of stock market trading courses, Learn-To-Trade.com has taught tens of thousands of investors, of every skill level, how to trade more confidently and profit more consistently.

The trading professionals at Learn-To-Trade.com will give you the technical and fundamental skills necessary to analyze stocks, read economic cycles, and spot market trend. You’ll also learn about risk management and capital preservation.

At Learn-To-Trade.com, we also understand that investors learn at their own pace and/or may want to spend more time with a certain investing strategy. That’s why we provide a unique,          Lifetime Membership that allows you to re-attend any part of the program as often as you’d like.

To learn more about Learn-To-Trade.com’s stock market trading courses, contact us at                416-510-5560 or by e-mail at info@learn-to-trade.com.

Also Read: Canadian Retail Spending Is Robust, Despite Rising Interest Rates

George Karpouzis

George Karpouzis is the co-founder of Learn-to-Trade and has been personally providing education and mentoring to over 3000 members since 1999. George has been trading in the stocks, options, futures and forex markets using technical analysis since 1986. With the help of advancements in trading technology the Learn To Trade program is now accessible worldwide. His background and passion for teaching brings an invaluable asset to our members. George is constantly striving to improve the program content and develop new strategic relationships for the benefit of the members.

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