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Last week, the Bank of Canada boosted its key interest rate by another three-quarters of a point, lifting it to 3.25 percent, the first time the rate has topped 3 percent since 2008 during the Great Recession.
The latest hike was the fifth in as many meetings of the bank’s rate-setting committee and followed a full point bump in July.
A new report found inflation in Canada had slowed to 7.6 percent in July, down from a record 8.1 percent the month before.
Still, more rate increases are ahead, the bank warned.
“The governing council remains resolute in its commitment to price stability and will take action as required,” the bank said in a statement announcing the rate rise.
The steadily higher interest rate has torpedoed the country’s housing market, where sales of existing homes have declined by 30 percent compared to a year earlier.
Increases in home prices accounted for 20 percent of Canada’s economic growth in 2022, The Wall Street Journal reported. In the post-COVID period, Canada had one of the world’s most sharply rising housing markets.
Also last week, the Reserve Bank of Australia added a half-point to its base interest rate, lifting it to 2.35 percent, the highest since 2015.
Last May, the rate was 0.1 percent.
Philip Lowe, the bank’s governor, has been urging a rate of 2.5 percent, which some see as a “neutral” rate that will pause inflation without damaging economic productivity.
The bank has counted on a strong labor market and persistent consumer spending to keep the economy moving while interest rates rise.
“We think that the [bank] is close to reaching the point at which tightening must slow, enabling time to assess the impacts of earlier hikes on the economy,” Bloomberg economist James McIntyre told the news service.
The bank expects inflation to approach 8 percent by the end of this year, and fall close to the bank’s target of below 3 percent in 2023.
Price increases are outstripping wage gains, an “important source of uncertainty” for Australians, whose household debt is among the highest among developed nations, Lowe acknowledged.