Key facts
- Money markets and economists anticipate a 25 basis point rate hike by the Bank of Canada on Wednesday.
- The move aims to prevent energy-led inflation from spreading to food and housing prices.
- Core inflation measures have eased below the bank's 1% to 3% target range.
- Third-quarter economic growth is expected to be substantially lower than the second quarter.
- Two-year Canadian government bond yields have risen more than 22 basis points since September.
The Bank of Canada is poised to increase its key interest rate by 25 basis points on Wednesday, according to market pricing and economist forecasts. This anticipated move is seen as a proactive measure to contain inflation driven by high energy prices, preventing it from permeating other sectors like food and housing. While core inflation has softened and economic growth is moderating, policymakers are reportedly concerned about the persistence of energy cost pressures. This would mark the first rate adjustment since July 2023 and the first change in a year.