As Canada contends with its highest inflation rates in decades, its central bank is announcing an aggressive interest hike.
The Bank of Canada is raising its key interest rate to 2.5 per cent, up a full percentage point.
This is the largest increase since August 1998. It surpasses many predictions that called for a 0.75 per cent hike.
The Bank’s aim is to bring inflation back down to two per cent.
Indicators suggest inflation is at its highest point in 39 years, reaching 7.7 per cent in May. Major causes include the war in Ukraine and pandemic-related supply chain issues.
Officials say they are expecting inflation to jump as high as eight per cent before finally turning around.
To learn more about the interest rate and its effects on the Canadian economy, click here.
The rate affects how easy it becomes for banks to move money between each other.
When interest is high, banks tend to raise the cost of mortgages and lines of credit.
File photo courtesy of the Bank of Canada