The Bank of Canada, the Canadian central bank, has announced an increase in interest rates by 25 basis points, bringing them to 0.5% (first increase since October 2018). “The invasion of Ukraine by Russia is an important new source of uncertainty”, acknowledges the Canadian central institute, underlining that “the prices of oil and other raw materials have increased significantly”. This could drive inflation up further around the world and negative impacts on confidence and new supply disruptions could weigh on global growth. “The volatility of the financial markets has increased. The situation remains fluid and we are following events closely,” the document reads.
The Bank of Canada acknowledged the uncertainty caused by the Russian invasion of Ukraine, which could weaken growth and raise inflation. “However, the Canadian economy is likely to be one of the most ‘isolated’ from the negative economic effects of the conflict,” they report from ING, which expects another five rate hikes in the course of 2022.