The Bank of Canada (BoC) hiked its policy rate by 75 basis points (bps) to 3.25% in September. This decision came in line with the market expectation.

In its policy statement, the BoC said rates will need to rise further given the inflation outlook.

Market reaction

With the initial reaction, USD/CAD edged lower from session highs but quickly recovered its losses. As of writing, the pair was up 0.3% on the day at 1.3190.

Key takeaways from policy statement

"Will be assessing how much higher rates need to go as the effects of tighter monetary policy work through the economy."

"Canadian inflation excluding gasoline increased in July and data indicate a further broadening of price pressures, particularly in services."

"Surveys suggest short-term inflation expectations remain high; the longer this continues, the greater the risk elevated inflation becomes entrenched."

"Canadian economy continues to operate in excess demand and labor markets remain tight."

"While Q2 growth was somewhat weaker than bank had projected, indicators of domestic demand were very strong."

"Global and Canadian economies evolving broadly in line with July projections."

"BoC continues to expect Canadian economy to moderate in H2 2022."

"Canadian housing market is pulling back as anticipated amid higher mortgage rates."

"BoC remains resolute in commitment to price stability and will take action as required to achieve 2% inflation target."