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Special Report

Canada Monetary Policy
Research Brief

January 2023

Interest Rate Hiking Cycle Appears to be Over
After Eight Consecutive Increases

Bank of Canada now expects to pause. Canada’s central bank increased its overnight rate by 25 basis points in January, citing stronger than expected economic momentum to end 2022 as its reason. Consequently, the policy rate now sits at 4.5 per cent. The BoC, however, accompanied its smaller rate hike with new guidance that it intends to hold the overnight rate at its current level, while it assesses the impact of the cumulative interest rate increases so far. As a result, it is widely expected that the central bank has reached the end of its monetary tightening cycle, as broad-based indicators suggest that annual price growth will continue to soften and return to the Bank’s target range of 1 per cent to 3 per cent. Nonetheless, the pause in interest rate increases is conditional on the outlook evolving as expected and inflationary pressures continuing to ease. 

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