The central bank had briefly hit pause on rate hikes in March and April of this year after nine successive jumps, but has now raised rates in two consecutive months amid indications that the economy continues to operate at a faster clip than the Bank would like.
Canada’s annual pace of inflation slowed slightly in May, with the consumer price index (CPI) rising by 3.4% on a yearly basis compared with a 4.4% jump in June. Still, that remains above the Bank’s target rate of 2%, with measures of core inflation also staying persistently high.
While the national unemployment rate inched upwards in June, the economy added 60,000 jobs that month, meaning today’s rate hike came as little surprise to most observers.
A Reuters poll of economists conducted in recent weeks saw 20 of 24 respondents indicate that they expected today’s decision to result in a 25-basis-point increase.
Whether or not today’s move will be the Bank’s last of the year remains to be seen. CIBC Capital Markets senior economist Andrew Grantham said June’s strong jobs figures had “tipped the scales” towards a rate hike today – but added that CIBC currently expects the overnight rate to rise no higher than 5% this year.