Bank of Canada Hikes Rates

Image copyright: Reuters [via The Straits Times

The Facts

  • The Bank of Canada (BOC) on Wednesday raised its interest rate by another 0.25% to a benchmark rate of 4.5%, the highest it has been in 15 years. However, the BOC also became the first major central bank to say it would likely halt further increases.

  • The latest increase, which was in line with expectations, means the bank has increased rates by 425 basis points in 10 months. Canada has seen inflation drop from its 8.1% peak to 6.3% as of December, though it's far from the target of 2%.


The Spin

Pro-establishment narrative

The goal of BOC has always been, and continues to be, fighting inflation, which means slowing the economy through various tools. Inflation is still at over 6%, so while the bank will pause any further rate hikes for the time being, it has rightly left the door open to further increases down the road.

Establishment-critical narrative

Inflation has decreased, but not because of the BOC’s rate hikes. Rather lower commodity prices and the clearing of supply chains have indicated that inflation was transitory after all. With Canadians feeling the pressure of the bank's monetary tightening, the BOC shouldn’t even think about more hikes moving forward.


Establishment split

CRITICAL

PRO

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