The Bank of Canada today decided to leave the overnight lending rate unchanged at 4.5% and signalled a continuation of quantitative tightening.

The Bank’s decision continues along its policy of quantitative tightening, albeit with a dovish tone this time around, signaling that it may be nearing the end of its historic rate-hike cycle.

A central bank is a financial institution that manages the production and distribution of money and credit for a state, or a group of states. Central banks oversee its state’s commercial banks and maintain a monopoly on the money supply of the state.

The Bank of Canada has increased the target overnight rate by 50 basis points to 3.75% as it continues its policy of quantitative tightening.

The Bank of Canada (BOC) maintained its aggressive stance towards inflation as it raised interest rates by 75 basis points (bps). This is the fourth consecutive “outsized” hike, bringing its target overnight rate to 3.25%.

On Friday, August 26, the annual Jackson Hole Symposium was held in Wyoming. Each year the Federal Reserve-sponsored conference focuses on critical economic issues facing the world economy. This year, the focus was on Fed Chair Jerome Powell and the Federal Reserve's stance on using interest rates to battle inflation going forward. Comments made by the Fed not only pertain to the US, but many central bankers and finance ministers globally also look to the US for guidance

Canada’s inflation rate showed signs of slowing down, but we are not out of the woods just yet. The Consumer Price Index (CPI) for July increased 7.6% year-over-year, down from 8.1% in June. This was the first month-over-month disinflation since July 2021.

The Federal Reserve increased its main policy rate by 0.75% for the second time in a row. This is the United States’ fourth rate hike of 2022, increasing the benchmark interest rate to a target range of 2.25% to 2.50%.

The May CPI data out of the US came in much hotter than expected. Most analysts had expected year over year inflation to hit 8.3% but instead flew right past that to a new 40 year high of 8.6% (highest since 1981). The inflation numbers are being led by food and energy prices, which even when excluded; still puts inflation at an eye watering 6% year over year. Canadian energy and mining stocks declined as commodities fell after China imposed new lockdowns in parts of Shanghai, lowering the demand outlook. U.S. stocks also fell for a second day as concerns grew after Europe’s central bank became the latest to signal restrictive policies to combat inflation. The ECB made no change to the deposit rate, which was widely anticipated, but is preparing to hike by a quarter-point next month, and again by either that amount or more if inflation persists. In Canada the labour force survey was released today and showed a concerning increase in private sector unemployment (up 2%) and a shift to public sector jobs – an increase of 11%.