The Bank of Canada on Wednesday announced a historic 1% increase in the key rate in an attempt to curb inflation. This now stands at 2.5%.
The Bank acknowledges that inflation in the country is “higher and more persistent” than it forecast last April, when it should average 8% in the second and third quarters of this year.
“While global factors like the war in Ukraine and continued supply disruptions have been the main drivers of inflation, domestic price pressures from excess demand are gaining in importance,” the institution explained. in a press release.
Despite this historic increase, the Bank had announced its colors in recent months. During the 0.5% increase announced in early June, she said she was ready to “act more forcefully” if inflation persisted.
The price increase is having an impact on the daily lives of Canadians and is now perceptible on a large portion of the basket.
Indeed, the Bank notes that “more than half of the components of the consumer price index now show an increase of more than 5%”.
The United States announced that inflation had reached 9.1% on Wednesday, the highest level since 1981. For its part, the Chinese economy is also experiencing a slowdown due to its management of the COVID-19 pandemic.
Although the global context plays a leading role in prices, the Bank of Canada economists have focused their analysis on the domestic context, marked by an unemployment rate at a historic low combined with an increase in the consumption.
“Due to strong consumer demand, businesses are passing on their higher input and labor costs to their selling prices,” the Bank explains.