BoC raises overnight rate by 50bps to 1.00% as widely expected. The Bank Rate and deposit rate are increased to 1.25% and 1.00% respectively. Additionally, BoC announced to end the asset reinvestment phase and starts quantitative tightening, effect April 25.
BoC also maintains tightening bias, and said, “with the economy moving into excess demand and inflation persisting well above target, the Governing Council judges that interest rates will need to rise further.” The timing and pace of further rate hikes will be guided by ongoing assessment of the economy.
In the Monetary Policy Report, BoC projects the Canadian economy to growth by 4.25% in 2022, then slow to 3.25% in 2023 and then 2.25% in 2024. CPI inflation is projected to average almost 6% in H1 2022, and remain “well above the control range through this year”. CPI is then expected to ease to 2.25% in H2 of 2023, and return to 2% target in 2024. But “there is an increasing risk that expectation s of elevated inflation could become entrenched.
