In its second policy rate announcement of 2022, the Bank of Canada opted to hike its target for the overnight rate by 25 basis points to 0.5 per cent. Economists and industry experts are reacting to the bank’s decision, which marks the first increase to the mortgage-influencing overnight rate since October 2018.

At the onset of COVID-19, the BoC made three emergency cuts to the overnight rate in March 2020, bringing it down from 1.75 per cent in a matter of weeks as the pandemic sent shockwaves through global markets. The overnight rate has stayed at a quarter percent until now.

In it’s announcement, the BoC stated that Canada’s economic growth has been strong, rising 6.7 per cent in Q4-2021, higher than what the bank had projected and an affirmation that “economic slack has been absorbed.” With the rebound from the Omicron variant underway, household spending is up and is expected to get stronger as more public health restrictions are lifted.

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