Bank of Canada hikes key interest rate 50 basis points for 2nd time in a row

The Bank of Canada raised its benchmark interest rate to 1.5 per cent on Wednesday, marking a second straight increase of half a percentage point.

The 50-point move was widely expected by economists who predicted the central bank would raise rates for the third time this year in an effort to tamp down on high inflation levels. Read more: Canadians may see a 0.5% interest rate hike this week thanks to ‘persistent’ inflation Wednesday’s increase marks the first time the Bank of Canada has hiked rates 50 basis points in back-to-back decisions in nearly 25 years. “With the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the Governing Council continues to judge that interest rates will need to rise further,” the Bank of Canada said in a statement. “The pace of further increases in the policy rate will be guided by the Bank’s ongoing assessment of the economy and inflation, and the Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the two per cent inflation target.” Initial rate hikes of 25 basis points in March followed by 50 basis points in April have already had a cooling effect on Canada’s housing market as rising mortgage rates keep more buyers on the sidelines.

Some cities including Toronto saw a slowdown in sales and a drop in prices last month. Statistics Canada said the annual inflation rate was 6.8 per cent nationally in April, with the rising price of food and shelter pushing the Consumer Price Index (CPI) higher.

The latest interest rate hike puts many small businesses in a tough position, said Simon Gaudreault, chief economist for the Canadian Federation of Independent Business (CFIB). “Only 35