Rates up again. More hikes likely.

As expected the Bank of Canada has raised its trend setting interest rate. It jumped by another, outsized, three-quarters of a percentage point to 3.25%. This has triggered a series of knock-on effects in the lending and mortgage markets.

The move puts the BoC’s policy rate above its self-declared “neutral” range of 2% to 3%, and it is now in restrictive territory.

All the of big banks have pushed their prime rates to 5.45%. In turn variable rate mortgages and lines of credit have become more expensive, adding about $40 in costs for every $100,000 owed, based on a 25-year amortization.

The qualifying, stress-test, rate is now more than 7%. That has realtors calling for an easing of the program. The regulator, the Office of the Superintendent of Financial Institutions, has said outright, it will not do that at this time.

The BoC’s Senior Deputy Governor, Carolyn Rogers, says further increases should be expected as the fight against inflation continues.

“Given the outlook for inflation, we continue to judge that the policy interest rate will need to rise further. As the effects of tighter monetary policy work through the economy, we will assess how much higher interest rates need to go to return inflation to target,” Rogers said in a speech the day after the rate announcement.

Consumer inflation, as measured by the Consumer Price Index (CPI), pulled back slightly in July from 8.1% to 7.6%. Core inflation increased to 5.3% in July from 5.23% in June. Core inflation, which does not include volatile items like food and fuel in its calculation, is what the Bank of Canada uses in its policy decisions.