Monday Market Minute | Apr 11, 2022

BoC goes jumbo — 50-basis-point hike takes the overnight rate to 1.00% as inflation broadens

What Moved

The Bank of Canada delivered a 50-basis-point rate increase on April 13 — the first oversized hike since May 2000 — taking the overnight rate to 1.00%. Governor Macklem warned that inflation at 6.7% was "too high and rising" and that the economy could handle a faster pace of tightening. The BoC also announced the beginning of quantitative tightening, allowing maturing government bonds to roll off the balance sheet without reinvestment. The message was unmistakable: the central bank was behind the curve and determined to catch up.

Why It Matters

The jumbo hike confirmed that the BoC was willing to front-load tightening aggressively. For private markets, this meant the floating-rate private credit advantage would compound faster than initially expected. But it also meant that leveraged transactions — PE buyouts, real estate developments — now faced a rapidly changing cost of capital. Deal underwriting from even three months earlier was already stale.

Signal to Watch

Whether the next decision would bring another 50-basis-point move — markets were now pricing in a series of oversized hikes through the summer.

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