Bank of Canada hikes rates to 1.00%

Source: Dukascopy Bank SA
On April 13, the Bank of Canada published its monetary policy statement. The central bank hiked its interest rate from 0.50% up to 1.00%, which was an expected 50 base point hike. Moreover, the bank stated that more increases are to be expected, as inflation continues to surge.

Meanwhile, the statements of the central bank were seen variously by market participants. High volatility ensued without a clear direction during the aftermath of the event.

Quoting the statement: "The Bank of Canada today increased its target for the overnight rate to 1%, with the Bank Rate at 1¼% and the deposit rate at 1%. The Bank is also ending reinvestment and will begin quantitative tightening (QT), effective April 25. Maturing Government of Canada bonds on the Bank's balance sheet will no longer be replaced and, as a result, the size of the balance sheet will decline over time.

CPI inflation in Canada is 5.7%, above the Bank's forecast in its January Monetary Policy Report (MPR). Inflation is being driven by rising energy and food prices and supply disruptions, in combination with strong global and domestic demand. Core measures of inflation have all moved higher as price pressures broaden. CPI inflation is now expected to average almost 6% in the first half of 2022 and remain well above the control range throughout this year. "

Released Document

Bank of Canada increases policy interest rate by 50 basis points, begins quantitative tightening

The USD/CAD fluctuated in a 49 base point range due to the announcement, before returning to previous trading levels.

On a larger scale, the US Dollar has been surging against the Loonie throughout all of April.

Initial Reaction

Larger scale situation

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Thu, 14 Apr 2022 12:26:59 GMT

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Wed, 13 Apr 2022 08:01:11 GMT

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