Bank of Canada Raises Rates to 22-year High

The Central Bank of Canada raised the base rate by 25 basis points to set the one-night lending rate at 4.75%, the highest level in 22 years.

With the move, the Canadian central bank ended a period of interest stabilisation that lasted only about 4 months, as it found itself forced to rise as the level of consumer spending increased more than expected and amid growing fears that inflation would remain at high levels.

The Bank of Canada was the first major central bank in the developed world — and the only among the G7 countries — to announce a deadline to stop raising interest rates, after major increases that raised borrowing costs by 4.25% over just 10 months.

It was believed among central bank officials at the time that economic activity and inflation would slow until 2023.

Some economists believe the Bank of Canada has not finished raising interest rates and expect another quarter-point hike in July.

Following the leverage, Canadian two-year bond yields increased to 4.571%, the highest level since August 2007.

The Canadian dollar also jumped to C$1.3347 against the US dollar.

The move follows Tuesday’s sudden 25 basis points increase for a past by the Reserve Bank of Australia.