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We’re in the midst of a cost-of-living crisis—with sky-high grocery prices and mortgage rates that would have been inconceivable 18 months ago. To fight inflation, the Bank of Canada (BoC) has increased the policy interest rate by a total of 475 basis points (4.75%) since March 2022 (a basis point is equal to one hundredth of a percentage point). But is it helping?
Thankfully, yes, it is. Inflation fell to 2.8% in June, within the BoC’s target band of 1% to 3%, but ultimately the central bank would like it to reach 2%. And it may be too early to celebrate, because certain goods, such as groceries, remain stubbornly expensive (grocery prices were up 9.1% year-over-year in June), and gas inflation is down (prices fell 21.6% year-over-year in June) simply because prices were so high last year.
How much more financial pain lies ahead? How high could interest rates go in Canada?
The impact of BoC rate hikes so far
When the BoC increases or decreases its interest rate, the banks follow suit…
