The cost of borrowing is going up again and this time it’s a doozy. The Bank of Canada raised its benchmark interest rates by 25 basis points Wednesday, bringing the cost of credit the highest since 2001.
The central bank’s key interest rate now stands at 5.0 per cent following back-to-back hikes.
Although inflation has cooled overall to 3.4% from as high as 8.1% in June 2022, many economists expected another hike as the Bank of Canada has failed to tame inflation to the 2% target.
Many economists, including Canada’s big six banks, had expected the move amid signs of resilience in the Canadian economy and fears that annual inflation would not fall all the way back to the central bank’s target of two per cent.
The central bank said in a statement that it now expects inflation will hover around three per cent for the next year before dropping to the 2% range in 2025.
The announcement comes as millions of Canadians face higher mortgage rates especially those in a variable rate mortgage , who could see their monthly payments increase by hundreds of dollars a month.
