The Bank of Canada increases its key rate by 0.5 percentage point. It now stands at 3.75%

The Bank of Canada raised its key rate by half a percentage point on Wednesday as it expects interest rates to rise further in a bid to contain inflation at a decades high.

Since March, the central bank has raised its key rate from 0.25% to 3.75%, making it one of the fastest monetary tightening cycles in its history.

Before the announcement, economists’ forecasts were divided on whether the central bank would opt for a hike of half a point or three-quarters of a percentage point.

The Bank of Canada expects inflation to slow to 3% by the end of 2023 before returning to its target of 2% in 2024.

Canada’s annual inflation rate fell slightly in September to 6.9%, but the cost of groceries continues to rise.

As fears of a looming recession grow, the central bank says it expects economic growth to stagnate through the end of the year and into early 2023 before rebounding.

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