The Canadian Press
Published Wednesday, March 2, 2022 5:17AM EST
Last Updated Wednesday, March 2, 2022 5:17AM EST
OTTAWA-- The Bank of Canada is poised this morning to raise its trendsetting interest rate after signalling the move a few weeks ago when it said it would no longer promise to keep the rate at emergency levels.
It was two years this week that the Bank of Canada first cut its key policy rate in response to get ahead of any economic fallout from a novel coronavirus.
What followed were two more rate cuts in March 2020 that brought the key policy rate to 0.25 per cent, where it has stayed since then.
The central bank recently pointed to better-than-expected economic growth to end to 2021, a roaring housing market and inflation rates at three-decade highs as signs it may be time to hike rates from emergency levels.
BMO chief economist Douglas Porter says he expects the central bank to raise its rate by a quarter percentage point to 0.5 per cent.
He says the first rate hike may have the largest affect on how households manage their debt, but the central bank would have to raise rates by a full percentage point before there is an effect on the country's housing market.
"Every single basis point matters to somebody out there," Porter says.
"We'd need to see a number of Bank of Canada interest rate hikes before it would really begin to seriously affect the economy."
A rate hike generally takes as little as six months or as many as 18 months before it has an effect on headline inflation.
The annual inflation rate rose to 5.1 per cent in January and are expected to go higher with rising global oil prices.
This report by The Canadian Press was first published March 2, 2022.
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2022-03-02 10:17:29Z
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