By Julie Gordon

OTTAWA, Reuters – On Wednesday, the Bank of Canada is likely to proceed with its second half-point increase in interest rates. This comes as Canada tries to curb runaway inflation. What happens next is the big question.

According to Reuters, all 30 economists surveyed expect that the central bank will raise its policy rate by 1.5%. This is in addition to 1.0%. The decision was made at 10. ET (1400 GMT). It will come after April’s 50-basis point move. This is the first such rise in over two decades.

Teasing an even larger lift, Governor Tiff MacKlem said in recent weeks: Discussions ahead of Wednesday’s decision will center around a further 50 basis-point increment.

Market watchers will pay attention to the statement attached for clues about what’s yet to come. This includes whether an unheard-of third consecutive half percentage point rise is possible.

“I think that the focus will remain on the pace for future rate increases, since there’s some uncertainty about what the next step is,” stated Royce Mendes of Desjardins Group, chief of macro strategy.

The money markets already priced in the third consecutive 50-basis point increase in July. Investors are now looking to see if there is a peak in rates above 3%. This level has not been seen since 2008.

Canada saw its inflation rate rise to 6.8% in April. Food prices have risen at levels not seen since 1980. Unchecked inflation by the Bank of Canada can lead to a spiral in food prices, which will make it difficult for the Bank of Canada to achieve its 2% inflation goal.

Officials are clear in their desire to return the policy interest rate to neutral — between 2% and 3% — however, it won’t all be simple. Because higher rates had a negative impact on the consumer market and housing, the Bank had no choice but to suspend at 1.75% during the last cycle.

Analysts said that other sectors of the economy might have to be left behind to deal with inflation this time.

Due to such high levels of inflation, “the game has changed completely this year.” Doug Porter of BMO Economics, chief economist, stated that rates must be hiked by the Bank.

Although the central banks forecast was close to accurate, Tuesday’s first quarter economic growth showed a disappointing performance. According to preliminary estimates, April’s slowing sales of homes was due to rising interest rates. This is starting impact growth. However, domestic demand was robust and household spending seemed strong heading into the next quarter.