The Bank of Canada has hinted that more interest rate hikes could be coming this year as inflation remains above its 2% annualized target.
As was widely expected among economists, the central bank raised its trendsetting overnight interest rate by 25-basis points for a second consecutive time, lifting the key rate to 5%, its highest level since 2001.
At a news conference, Bank of Canada Governor Tiff Macklem left the door open to further rate hikes this year in order to lower inflation that is currently running at 3.4%.
Specifically, Macklem said that the central bank is prepared to hike rates further “if new information suggests we need to do more.”
Traders raised their bets that the Bank of Canada will again raise interest rates at its next meeting on September 6, putting the odds of another increase at 50%.
The Bank of Canada also revised its inflation forecast following its latest policy meeting. Central bank officials now forecast that inflation will linger around 3% for the next year before declining to 2% in mid-2025, two quarters later than previous estimates.
During his news conference, Governor Macklem told reporters that it is too early to discuss when interest rates in Canada might be lowered.
