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When You Need To Know About The Bank of Canada’s Interest Rate Increase

They’re still going up!

As expected, the Bank of Canada raised interest rates today, with the key overnight rate now at 5 per cent, the highest it has been since 2001. The increase of 25 basis points is the 10th rate hike since March 2022.

Inflation has dropped from a peak of 8.1 per cent last summer to 3.4 per cent in May. But the Bank remains concerned that inflation will stay above 3 per cent over the next year. The Bank’s mandate is to keep inflation at about 2 per cent.

Bank of Canada Governor Tiff Macklem said, “If new information suggests we need to do more, we are prepared to increase our policy rate further. But we don’t want to do more than we have to. … We need to see demand growth slow, wage pressures moderate and corporate pricing behaviour normalize.”

The Canadian labour market has been relatively resilient, with employment numbers outperforming predictions in June, rising by 60,000 after a net loss of 17,300 positions in May. Despite the gain, the unemployment rate rose to 5.4 per cent from 5.2 per cent, because of a strong expansion in job seekers driven by immigration and the increased cost of living. The strong employment market has continued to fuel inflation and, in turn, drive rate increases.

The latest interest rate increase will reverberate across the country but also on Parliament Hill, where the rising cost of living is a top issue. Last week, the government issued cheques for the new grocery rebate to help lower-income Canadians mitigate the increasing cost of essentials.

There were widespread concerns late last year that rate hikes would push the country into recession but that hasn’t proved the case. Still, concerns remain about a downturn in early 2024.

Many Canadians are concerned about the cost of feeding their families and paying their bills. According to research conducted by TransUnion, 43% of Canadians say their finances are worse than they had expected. Inflation (47%), rising house prices (14%), and a possible recession (11%) are the top concerns cited as affecting household finances over the next six months. The rate hikes have impacted, in particular, mortgage rates paid by millions of Canadians.  

Meanwhile, the Liberal government is turning its attention to the Fall Economic Statement and beginning to consider what should be in the 2024 budget.

For more information on how to manage these increasing interest rates, contact us at

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