Bank of Canada discusses inflation, economy after key interest rate raised 50 basis points | FULL

Bank of Canada Governor Tiff Macklem held a news conference Wednesday morning after it was announced for the first time it has raised interest rates by more than 25 basis points in more than two decades. The central bank’s key overnight rate now stands at one per cent.

Macklem said that while the Canadian economy is strong overall, the economy has fully recovered from the pandemic and is now moving into excess demand. Inflation is too high and is going to be elevated for "longer than we previously thought" in part due to global supply chain disruptions and the war in Ukraine.

Canadians can expect CPI inflation rates to average six per cent in the first half of 2022 and remain well above the one to three per cent control range this year. He added the central bank remains committed to getting the target inflation rate back to 2 per cent.

Macklem also said the bank forecasts the Canadian economy will grow 4.25 per cent this year before moderating to 3.25 per cent next year based on consumer spending, improved labour productivity, higher immigration as well as interest rates should moderate growth in domestic spending.

Wednesday’s 50-basis-point hike was widely expected by economists and market watchers who argued the central bank would have to act swiftly to get rampant inflation under control.

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