Alongside a surprising 100 basis point increase to its key policy rate, the Bank of Canada also adjusted its forecast for Canadian inflation and economic growth on Wednesday.
Alongside a surprising 100 basis point increase to its key policy rate, the Bank of Canada also adjusted its forecast for Canadian inflation and economic growth on Wednesday amid an ongoing surge in commodity prices and rising domestic housing costs.
As for inflation, the Canadian central bank said the Canadian consumer price index is poised to be"substantially higher than projected in April", with the end-of-year outlook revised higher by nearly two percentage points to 7.2 per cent. The Canadian central bank updated its economic forecasts while raising interest rates by a full percentage point on Wednesday. It attributed its changes to its economic projections due to higher commodity prices and lower global demand, which may lead to lower exports and business investment.
Commodity prices, specifically oil, accounted for about 45 per cent of the Bank of Canada's total underprediction of inflation as refinery margins have deviated from historic levels, causing a sudden increase in gas prices.
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