Global inflation is higher, reflecting the impact of the Russian invasion of Ukraine, ongoing supply constraints, and strong demand. Many central banks are tightening monetary policy to combat inflation, and the resulting tighter financial conditions are moderating economic growth.
Bank of Canada expected to raise interest rate
In July, the Bank of Canada raised interest rates by 100 bp. It was the largest single rate increase since August 1998 after a series of hikes that began in March. Previously, the rate had been at 0.25
per cent where it sat since it was slashed to near-zero early in the pandemic.The BoC increased its target for the overnight rate to 2,5%, with the Bank Rate at 2,75% and the deposit rate at 2,5%. The Bank is also continuing its policy of quantitative tightening (QT).
At press conference, Tiff Macklem - Governor explain what prompted your decision. The most important stimulus was that inflation in Canada was higher and more persistent than the Bank expected in its April Monetary Policy Report (MPR) and the fear of further growth as well as the lack of workers and many goods and services. Demand needs to slow down for supply to catch up and the price pressure to ease off. And the most important goal of monetary policy is to restore inflation to 2% and to achieve price stability.
Source: www.bankofcanada.ca
As shown by data from the Canadian bank, inflation slightly decreased. As inflation fell, the unemployment rate also fell in 22Q2. What could be positive news for the Canadian economy.
According to the Bank's July speculation, inflation will fall to around 3% by the end of 2023 and will return to the 2% target by the end of 2024. Therefore, economists predict that there will be another rate hike in September. Some of Canada's major banks are forecasting the central bank will raise the key interest rate by three-quarters of a percentage point, bringing it to 3.25 per cent.
The next scheduled date for announcing the overnight rate target is September 7, 2022. Some economists think Wednesday's hike could be the last for a while.
The RBA will raise rate by 50 bp?
At meeting at 2 August 2022, the Board of RBA decided to increase the cash rate target by 50 basis points to 1.85 %. In the simplest terms, the RBA cash rate is Australia’s official interest rate. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.75 %.
The Board places a high priority on the return of inflation to the 2–3% range over time, while keeping the economy on an even keel. The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments.
Inflation in Australia is the highest it has been since the early 1990s. In headline terms, inflation was 6.1 % over the year to the June quarter; in underlying terms it was 4.9 %. Global factors explain much of the increase in inflation, but domestic factors are also playing a role. There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy. The Bank's central forecast is for CPI inflation to be around 7,75% over 2022, a little above 4 % over 2023 and around 3 % over 2024.
Australia Inflation is expected to peak later this year and then decline back towards the 2–3 % range. The expected moderation in inflation reflects the ongoing resolution of global supply-side problems, the stabilisation of commodity prices and the impact of rising interest rates.
Forecasts that the RBA will raise the monetary rate by 50 basis points at its meeting on September 6, raising rates to 2.35%. Not only the economic situation shows this, but also the analysis of previous decisions.
The interest rate hypotheses will be confirmed or disproved at the Tuesday meeting.
Source: www.bankofcanada.ca, www.rba.gov.au