Bank of Canada expected to hike interest rate on Sept. 7

Borrowing costs are about to go up again.

The Bank of Canada is scheduled to make its latest interest rate policy announcement on Wednesday, Sept. 7. It is expected to once again raise its benchmark rate for a fifth time this year.

While most economists agree the interest rate will be moving higher, the debate is how big that increase will be.

The discussion at this point is that the central bank will deliver one last big hike in an effort to cool inflation, which is close to a 40-year high.

Of the 11 economists surveyed by the Wall Street Journal, all expect a hike of 75 basis points, which would bring the overnight rate to 3.25 per cent — three per cent above where Canada started the year.

Some experts say a pause might be necessary, with signs pointing to a mild recession either late this year or early next year, though that is also a source of debate.

The last key interest rate hike was an increase of a full percentage point to 2.5 per cent in July. That move of 100 basis points was the largest single increase since August 1998.

“With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the Governing Council decided to front-load the path to higher interest rates by raising the policy rate by 100 basis points today,” the Bank of Canada said in its statement on July 13.

Changes to the interest rate will affect variable rate mortgages and home equity lines of credit, as well as other borrowing costs pegged to the overnight benchmark lending rate.

With files from Patricia D’Cunha.