OTTAWA (Reuters) – The Bank of Canada on Wednesday raised its key rate by 50 basis points to 4.25%, the highest level in nearly 15 years, but hinted that the tightening cycle currency was soon coming to an end.
Money markets were expecting an increase limited to 25 basis points but a narrow majority of economists polled by Reuters had predicted a rise of 50 basis points.
The Canadian central bank, which has raised its key rate by a total of 400 basis points since March, justified this new tightening by continuing strong growth and a tight labor market.
The money-issuing institution, however, gave up its “forward guidance”, the guidance on the future evolution of its policy that it had been using since the start of the tightening cycle, according to which rates should increase further.
“Going forward, the Governing Council will assess whether it is necessary to raise the policy rate further to bring supply and demand into balance and inflation on target,” the Bank of Canada wrote in its press release. Monetary Policy.
The central bank notes that inflation measured by the consumer price index remained at 6.9% in October, a level which it considers still too high while expectations in this area in the short term remain high.
She points out, however, that the three-month variations of so-called core inflation have fallen, a sign that “pressures on prices could be easing”.
The Bank of Canada also notes that the growth of gross domestic product in the third quarter, which increased by 2.9% at an annualized rate, “was stronger than expected”, that “the economy continued to show a demand surplus”, while “the labor market remains tight”.
(Reporting Steve Scherer and David Ljunggren; French version Claude Chendjou, editing by Kate Entringer)
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