‘It’s going to get more painful’: Bank of Canada widely expected to raise key interest rate Wednesday

The Bank of Canada is widely forecast to raise its key overnight lending rate Wednesday by another 25 basis points, to five per cent, after“We expect a 25-basis-point hike from the Bank of Canada this week,” said CIBC senior economist Andrew Grantham.

“The risks are still tilted to hikes continuing. If the past six months are any indication, we’re just not as interest-rate sensitive of an economy as we thought we were,” said Benjamin Reitzes, BMO’s managing director for Canadian rates and macro strategist. The Bank of Canada has kept a close eye on the labour market for signs of overheating in the economy. The Bank has repeatedly said that the country’s hot labour market is contributing to high inflation, raising concerns about the pace of wage growth in particular and whether it could prop up inflation over the longer term.

And many with fixed-rate and variable-rate mortgages who are coming up for renewal in the near future will feel the financial squeeze acutely — according to Statistics Canada’s latest consumer price index released in June,“We’ve already seen about $40 to $50 billion a year in consumer disposable income diverted from buying stuff, to paying more interest to the banks,” Stanford said.

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