Not this again: Bank of Canada is expected to raise interest rates this week

Another interest rate hike may be on the cards for the Bank of Canada, and experts are predicting it could be a heavy one.

The Bank of Canada has raised its key interest rate five times this year, with the latest spike coming just last month.

On September 7, the central bank announced that it was increasing the rate to 3.25% in an attempt to curb inflation. It increased by 0.75% from the institution’s full percentage point hike in July to 2.5%. That was the biggest spike since 1998.

Late last week, Bank of Canada’s former governor, Mark Carney, told a Senate committee that Canada is likely headed for a recession citing, “difficult economic times.”

With recession fears looming over their heads, Canadians are even more anxious about a sixth rate update. Rents across the nation are becoming more unaffordable, and a mortgage rate increase could add fuel to the fire. Economists are sounding the alarm.

A recent report by the Organization for Economic Co-operation and Development (OECD) already expects the Bank of Canada will increase its rate to 4.5% by 2023 — higher than the expectation of an absolute ceiling of 4% in the current rising cycle. This would amount to at least another 0.75% hike over the coming months.

OECD warned that such a steep hike would be necessary to further bring rampant inflation under control, including reducing economic demand to put a real damper on rising labour costs due to the immense labour shortage.

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With files from Daily Hive’s Ty Jadah and Kenneth Chan