Canada’s central bank expects inflation to average near 6 per cent in the first half of 2022, before easing through the rest of the calendar year.
| The Bank of Canada raised its interest rate by half a percentage point in its biggest hike in 22 years and said rates are poised to move significantly higher as it moves aggressively to wrestle inflation down from a three-decade high.
Short-term bonds fell, pushing Canada’s benchmark two-year yield to 2.335 per cent as of 10.47am Ottawa time, about 3 basis points higher than immediately before the decision. The loonie strengthened slightly to $C1.2634 per US dollar.
Investors have been betting the central bank will continue hiking borrowing costs in coming months until the policy rate rises to near 3 per cent by this time next year.The bank no longer plans to replace federal bonds as they roll off their balance sheet starting later in April. Over the next 12 months, about a quarter of the net $C350 billion in government debt acquired during the pandemic will mature, pushing up yields, and complementing the increase in the policy rate.
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