The Bank of Canada is expected to hike its key interest rate by another quarter-percentage point on Wednesday, bringing it to 4.5 per cent and continuing one of the fastest monetary policy tightening cycles in its history amid warning signs of a potential recession.
Here’s how we got here:
Oct. 24, 2018: The Bank of Canada’s key interest rate reached 1.75 per cent after gradually increasing since the 2015 oil price crash that rippled through the Canadian economy. That rate remained unchanged throughout 2019.
March 4, 2020: The Bank of Canada cut its key interest rate by half a percentage point to 1.25 per cent amid economic concerns stemming from COVID-19, just days before the World Health Organization declared a global pandemic.
March 13, 2020: The Bank of Canada announced that it would lower its overnight rate target by another half percentage point to 0.75 per cent, effective March 16, in a rare unscheduled announcement. At the time, the central bank called the decision a “proactive measure” in response to the pandemic worsening, as well as the significant drop in oil prices.
March 27, 2020: The Bank of Canada lowered its key interest rate to 0.25 per cent, a record low, and launched a quantitative easing program (or government bond-buying program) to further stimulate the economy as COVID-19 continued to spread around the world.
Oct. 27, 2021: With the economy showing signs of new life and COVID-19 restrictions lifting, the Bank of Canada announced it was ending its quantitative easing program.
March 2, 2022: After keeping its key interest rate at 0.25 per cent for two years, the Bank of Canada raised it to 0.50 per cent. This came amid stubbornly high inflation and an increasingly volatile global economic landscape driven by Russia’s invasion of Ukraine.
April 13, 2022: The Bank of Canada further hiked its key interest rate by half a percentage point to one per cent. The last time the central bank raised the overnight target rate by half a percentage point rather than a quarter was in May 2000.
June 1, 2022: At the start of this summer, The Bank of Canada raised its key interest rate by another half of a percentage point to 1.5 per cent — the fastest year-over-year rise in more than three decades, to rein in a higher than expected inflation rate of 6.8 per cent.
July 13, 2022: As projected, another hike came later in the summer as the Bank of Canada raised its key interest rate by a full percentage point, a rare move and the largest single rate hike since August 1998.
Sept. 7, 2022: For the fifth consecutive hike this year, the Bank of Canada rose its key interest rate to 0.75 per cent, to a total of 3.25 per cent — the highest key rate since May 2008. After the hike, in an Oct. 6 speech, Bank of Canada governor Tiff Macklem said there is more to be done.
Oct. 26, 2022: The Bank of Canada hiked its key interest rate by half of a percentage point to 3.75 per cent. The central bank said rates will need to rise further to clamp down on decades-high inflation. Earlier in the year, economists were expecting the rate hike cycle to be completed by October.
Dec. 7, 2022: As a year marked by rate hikes drew to a close, the Bank of Canada raised its key rate by another half-percentage point to bring it to 4.25 per cent, the highest it’s been since January 2008 and an increase of four percentage points from the start.
This report by The Canadian Press was first published Jan. 25, 2022.