OTTAWA — After watching to see whether its aggressive rate hike path were enough to quash inflation, the central bank has opted to raise interest rates again — fuelling speculation that another rate hike is in the cards for July.The decision to raise interest rates comes after speculation among economists and forecasters that ongoing strength in the Canadian economy would push the central bank to hike rates again, though many expected it would wait until the summer before pulling the trigger.
Excess demand in the economy appears to be more persistent than the bank previously anticipated, the rate announcement said, citing a tight labour market, better-than-expected economic growth in the first quarter as well as “surprisingly strong” consumption growth. "The Bank of Canada should be doing a better job of communicating their intentions to the market," Mendes said.
"If I were them, I would have just stayed at four and a half per cent and wait see some more data," he said. "Well, inflation has come down a lot with, in fact, an unemployment rate lower than it was in January 2020." Earlier in the year, the Bank of Canada announced it would pause its aggressive rate-hiking cycle that began in March 2022. The central bank appeared cautiously optimistic that interest rates might be high enough to quash inflation, although it stressed that the pause was conditional on inflation falling and the economy softening.
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