Bank Of Canada Raises Key Interest Rate To 1.5% As They Predict Higher Inflation

Canadians who listened to previous Bank of Canada predictions are feeling a sense of whiplash.

The Bank of Canada has raised the benchmark overnight interest rate to 1.5%, a 50 basis point hike that is likely only the beginning of a move to higher and higher rates.

After flooding the economy with ‘printed’ money, enabling the massive deficits run by the Trudeau government, and having predicted interest rates would remain low, the Bank of Canada has significantly – and belatedly – reversed course.

Indeed, as you can see in the video below, top officials at the Bank of Canada – and the Liberal finance minister – had been talking about ‘deflation’ and downplaying inflation concerns:

This is why the Bank of Canada has lost so much credibility with Canadians.

Their main job is to accurately judge the pace of inflation and adjust accordingly.

Not only did they get it wrong, but they got it wrong repeatedly and by a wide margin.

And as they were getting it wrong, they were contradicting those who were getting it right.

Now, there has been a full reversal, with the Bank of Canada saying that future rate hikes are likely amid higher and higher inflation.

Here’s part of what they said in their official press release on the rate hike:

“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 policy interest rate remains the Bank’s primary monetary policy instrument, with quantitative tightening acting as a complementary tool. 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 2% inflation target.”

Why would there be ‘excess demand,’ even amid such troubling economic conditions?

Because there is excess money in the system.

Too much money chasing too few goods leads to surging demand – in the short-term – and higher prices.

It’s an economic distortion, something governments love because it can give the appearance of heightened economic activity, even as it merely borrows ‘growth’ from the future while devaluing our money and doing immense long-term damage.

Canada can’t keep on going down this irresponsible road, and our nation needs a return to sound money and fiscal responsibility to undo the damage caused by the Liberal government and the failures of the Bank of Canada.

Spencer Fernando

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