The US Federal Reserve began raising its official interest rate, known as the federal funds rate, in December 2015. Eighteen months later in July 2017, the Bank of Canada (BoC) also began to raise its official rate and it has done so three times since then. Now, it has raised its official rate again from 1.50% to 1.75%.
Statements from the BoC suggest more increases are to come in the short term. Recent references in the statement which accompany each decision to a “gradual approach” to tightening have disappeared and been replaced by the phrase “the policy interest rate will need to rise to a neutral stance to achieve the inflation target.”
The Canadian official rate is often referred to as the Bank’s policy interest rate. It is the BoC’s target rate for overnight borrowing and lending between banks in the Canadian interbank market. As such, this rate operates in very much the same vein as the US federal funds rate or the RBA’s overnight cash rate.