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Essentials of Monetary Policy

Bank of Canada (BoC). Liftoff Begins

March 2, 2022
Benoit P. Durocher
Director and Principal Economist

Today’s interest rate hike was widely expected. The target for the overnight rate has been at its effective lower bound of 0.25% since the start of the pandemic in March 2020, and it was becoming increasingly difficult to justify that degree of monetary easing. The economic recovery is well underway, with real GDP surpassing its pre-pandemic level last fall. Inflation has been picking up speed since early last year. The consumer price index rose 5.1% on a year-over-year basis in January, well above the 3% upper limit of the BoC’s target range.

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