
The Bank of Canada has not raised rates this aggressively since the early 1990s and its overnight rate is now well above the Bank's estimate of "neutral", or the level of its policy rate at which inflation should run at 2 per cent.. As such, the Banks is attempting to significantly slow the economy in order to bring inflation back to earth. It takes several quarters for rate increases to impact the broader economy, so the economic impact of the Bank's actions won't be fully felt until 2023. However, with mortgage rates at 5.5 per cent, the impact on the housing market is immediate and severe. Interestingly, the Bank did note its expectation for the economy to stall over the next 6 months. If that comes to pass and the economy is soon in a recession, and crucially if progress is made on bringing inflation down, it will be difficult for the Bank to keep its policy rate at current levels for an extended period.

Source - BCREA