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Macro

Bank of Canada raises policy rate for first time since 2023 on energy-driven inflation

The Bank of Canada raised its policy rate for the first time since 2023, citing inflation risks from higher energy prices, and warned borrowing costs may need to rise further with decisions made meeting by meeting. Revised forecasts put inflation at 3.5% by year-end, with the 2% target not reached until mid-2028. Governor Tiff Macklem said higher energy prices are expected to persist and cost pressures are building, while the two-year benchmark yield rose above 3.4%.

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AI take

The return of rate hikes after a long pause marks a shift in the macro backdrop that crypto and RWA markets have largely priced for easing, not tightening. The Bank's own forecast showing inflation above target through 2028 signals a prolonged higher-for-longer stance, which tends to weigh on risk appetite and tokenized yield products tied to short-rate expectations. The open question is whether other central banks follow with similar energy-driven tightening, since that would matter more for digital-asset liquidity than this single decision.

Generated by AI for reference only.

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