Jan 25, 2023
Experts react to Bank of Canada hiking rates for eighth straight time
Bay Street reacts to Bank of Canada decision
The Bank of Canada (BoC) hiked its key policy rate by 0.25 basis points to 4.50 per cent on Wednesday, marking an eighth consecutive increase.
In a press release on Wednesday, the central bank acknowledged that its aggressive interest rate hikes have worked to slow down activity, while they continue to strive for a two per cent inflation target. Should economic development continue to evolve in line with its monetary policy outlook, the BoC said it expects to hold its policy rate at current levels.
The BoC “is once again leading the way among global central banks as it's the first to signal a pause,” Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO Capital Markets, wrote in a note to clients on Wednesday.
Andrew McCreath, founder of Forge First Asset Management Inc., said the decision to hike and signal a pause was logical.
He added that “we have seen the biggest rate of change in interest rates” in over 40 years.
“The Bank of Canada is going on pause because, to be honest, the storm in the housing is only going to kick into gear during the second half of 2023,” McCreath said in an interview on Wednesday.
The central bank stated that is has seen a substantial decline in Canada’s housing market activity, alongside household spending and consumption growth.
“The central bankers are now seeing the data and are pivoting very quickly,” Jim Thorne, chief market strategist at Wellington-Altus Private Wealth, said in an interview on Wednesday.
The central bank reiterated that it will continue its fight against inflation, until it hits the two per cent target rate.
“To get that confidence that we’ll hit two to three per cent (inflation target rate), you can’t be discounting lower rates at the end of this year, because that just stimulates demand and it’s demand that gets you inflation,” Earl Davis, head of fixed income and money markets at BMO Global Asset Management, said in an interview on Wednesday.
“Best case scenario is we’re on hold for the balance of the year.”