The Federal Reserve was obliged to increase interest rates by 75 basis points in order to combat rising inflation, which reached 9.1 percent in June. According to a report released earlier on Wednesday by the Labor Department, the annual rate of inflation in the United States reached 9.1 percent in June. In the accompanying monetary policy report, Bank of Canada policymakers raised their near-term inflation forecasts yet again, predicting price pressures of around 8% in the second and third quarters of this year.This was included in the report since the forecasts were included in the accompanying monetary policy update. The inflation rate will decrease to 7.5% by the end of the year but will not return to the 2% target until 2024. In addition, government authorities reduced their projections for Canada’s economic growth. They now anticipate that the gross domestic product will increase by 3.5% this year and 1.8% in 2023, a decrease from their prior projections of 4.2% and 3.2%, respectively. This is because monetary policy is tightening its hold on economic activity and global growth is declining.

The bank has compiled data on a possible new risk scenario that includes “self-reinforcing wage increases and price spirals.” In addition, they claim that the longer inflation continues “far over” their 2% objective, the more likely it is that this scenario will materialize. In the report’s appendix, the bank acknowledged that its inflation projections for the previous year included errors. It ascribed the vast majority of errors to global external forces but also cited the rise in local home values. During the time of the outbreak, the bank noted that the “unsustainable speed” of real estate market activity had drastically reduced. It is anticipated that between now and 2023, both property sales and prices will fall.