Bank of Canada hikes interest rates for sixth time this year

The Bank of Canada raised its key interest rate by half a percentage point on Wednesday morning, hiking it to 3.75 per cent and continuing one of the fastest monetary policy tightening cycles in the bank’s history.

This is the 6th consecutive rate hike this year with the central bank expecting more hikes to come to clamp down on inflation.

The interest rate increase comes amid warning signs of a potential recession.

An economist says the Bank of Canada’s decision to raise its key interest rate by half of a percentage point is “surprising” and “risky.”

Bank of Canada governor Tiff Macklem says there are no easy outs in restoring price stability.

He says further rises in rates will depend in part on how monetary policy is working to slow demand.

READ MORE: With interest rates on the rise, we could see a cooling of the real estate market in 2022

The US Federal Reserve is expected to raise rates by a more aggressive three-quarters of a point next week.

RSM Canada economist Tu Nguyen says if that happens, the lower Bank of Canada increase could further weaken the Canadian dollar and fuel inflation by making imports from the US more expensive.

See below for a complete outline of the six interest rate hikes the Bank of Canada has seen this year:

• March 2: After keeping its key interest rate at 0.25 per cent for two years, the Bank of Canada raised it to 0.50 per cent. This came amid stubbornly high inflation and an increasingly volatile global economic landscape driven by Russia’s invasion of Ukraine.
• April 13: The Bank of Canada further hiked its key interest rate by half a percentage point to one per cent. The last time the central bank raised the overnight target rate by half a percentage point rather than a quarter was in May 2000.
• June 1: At the start of this summer, the key interest rate was raised by another half of a percentage point to 1.5 per cent, the fastest year-over-year rise in more than three decades.
• July 13: As projected, another hike came later in the summer as the Bank of Canada raised its key interest rate by a full percentage point, a rare move and the largest single rate hike since August 1998.
• Sept. 7: For the fifth consecutive hike this year, the key interest rate is raised by 0.75 per cent, to a total of 3.25 per cent, the highest key rate since May 2008. After the hike, in an Oct. 6 speech, Bank of Canada governor Tiff Macklem said there is more to be done.
• Oct. 26: The Bank of Canada hiked its key interest rate by half of a percentage point to 3.75 per cent. Earlier in the year, economists were expecting the rate hike cycle to be completed by October.