Bank of Canada expected to raise benchmark rate for first time in three years as oil shock persists
The Bank of Canada is expected to raise interest rates for the first time in three years to combat inflation driven by rising oil prices. Economists warn that this move carries risks, as it coincides with a housing slump and uncertain trade relations with the U.S.
Why it matters
Central bank interest rate decisions directly influence consumer borrowing costs, inflation, and the broader economic stability of the nation.
Bank of Canada Governor Tiff Macklem, shown in Bangkok earlier this month, has increasingly emphasized the upside inflation risk of rising oil prices. LILLIAN SUWANRUMPHA/AFP/Getty Images
The Bank of Canada is widely expected to raise its benchmark interest rate for the first time in three years on Wednesday in a bid to prevent high oil prices from becoming a broader and more entrenched inflation problem.
However, there is an unusual amount of uncertainty surrounding the decision, with hawkish messaging from the central bank appearing at odds with recent data showing inflation remains relatively well contained.
The bank’s governing council has kept the policy rate steady at 2.25 per cent since last October, with one eye on the economic damage caused by the trade war with the United States and the other on the global energy shock tied to the war in the Middle East.
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