Ottawa: The Bank of Canada on Wednesday raised its interest rate by 100 basis points in a bid to crush inflation, surprising markets and becoming the first G7 country to make such an aggressive hike in this economic cycle.
The central bank raised its policy rate to 2.5% from 1.5%, its biggest rate increase in 24 years, and said more hikes would be needed. Economists and money markets had been expecting a 75-basis point increase.
“We had indicated we were prepared to be more forceful. Today was more forceful,” Governor Tiff Macklem told a news conference after the decision.
“Yes, it is a very unusual move to increase by 100 basis points at one decision, and that really reflects the very unusual, exceptional circumstances that we find ourselves in.”
Earlier, the central bank said excess demand, high inflation felt across sectors, and rising consumer expectations of persistent price gains prompted the super-sized hike, which lifted the policy rate to its highest level since 2008.
The Bank of Canada’s move follows a 75 basis point rate hike by the U.S. Federal Reserve last month.
SBP raises policy rate by 125bps to 15pc
Pakistan also increased its key policy rate on Friday last week, when the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) increased the interest rate by 125 bps to 15% from 13.75% in a bid to control spiralling inflation.
Read: SBP raises policy rate by 125bps to 15pc
Inflation surged by a staggering 21.32% year-over-year in June 2022 as opposed to increases of 13.8% in the previous month and 9.7pc in June 2021.
In June 2022, the CPI climbed by 6.3pc compared to the previous month’s gain of 0.4pc and June 2021’s decline of -0.3pc, according to the monthly data on CPI published by the Pakistan Bureau of Statistics (PBS).
