STORY: The central bank, in a regular rate decision, raised its policy rate to 2.5% from 1.5%, and said more hikes would be needed. The move was more forceful than the 75-basis point increase economists and money markets had forecast.
“An increase of this magnitude in one meeting is very unusual. It reflects very unusual economic circumstances,” Bank of Canada Governor Tiff Macklem said at a news conference.
“By front loading interest rate increases now we're trying to avoid the need for even higher interest rates down the road. Front loading tightening cycles tend to be followed by softer landings,” he added.
The move makes it the first G7 central bank to increase rates by 100 basis points in this cycle. It follows a 75-basis point rate hike by the U.S. Federal Reserve last month.