Bank of Canada Raises Interest Rate to 2.50% for First Time Since July 2023

The Bank of Canada has raised its benchmark interest rate by 0.25 percentage points for the first time in three years, increasing it from 2.25% to 2.50%. Bank of Canada Governor Tiff Macklem said the decision was aimed at keeping inflation under control amid economic pressures caused by a sharp rise in crude oil prices.

The central bank had held its policy rate at 2.25% for seven consecutive decisions. Following the latest increase, mortgages, car loans and other commercial borrowing are expected to become more expensive, putting additional financial pressure on Canadians.

Citing elevated oil prices, Macklem projected that inflation could reach 3.50% by the end of this year, after remaining around 3% since April. He also signalled that further interest rate increases could be considered if economic conditions require them.

Notably, this is the first increase in the Bank of Canada's benchmark interest rate since July 2023.