The official statement from the Bank of Canada is below.
The overnight rate was increased by the Bank of Canada to 3.25 per cent and the deposit rate was increased to 3.25 per cent. Quantitative tightening is being continued by the Bank.
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The global and Canadian economies are moving in the same direction. The effects of the COVID-19 outbreak, supply disruptions, and the war in Ukraine are having a negative effect on growth.
Core inflation is moving up in most countries, and global inflation is still high. The monetary policy of the world's central banks continues to be tightened. The U.S. labour market is still tight despite the moderation of economic activity. There are challenges from the COVID shutdowns. Natural gas prices have risen while oil prices have moderated.
The consumer price index in Canada fell to 7.6 per cent in July from 8.1 per cent because of a drop in gasoline prices. The data shows a further broadening of price pressures in services. In July, the Bank's core measures of inflation ranged from 5 to 6 per cent. Short-term inflation expectations are high according to surveys. The longer this goes on, the higher the risk of inflation becoming entrenched.
The Canadian economy is operating in excess demand. In the second quarter, Canada's GDP grew by 3.3 percent. The indicators of domestic demand were very strong and consumption and business investment both increased. The housing market is pulling back because of high mortgage rates. The Bank expects the economy to moderate in the second half of the year as tighter monetary policy in Canada brings more demand in line with supply.
The Governing Council still thinks that the policy interest rate needs to rise further. The policy rate is increasing. We will be looking at how much higher interest rates need to go in order to return inflation to target. The Governing Council is determined to achieve the 2 per cent inflation target and will continue to take action to do so.
The next time the overnight rate target will be announced is in October of 2022. The next outlook for the economy and inflation will be published by the Bank at the same time.
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