CANADA: Fiscal Squeeze

The price of money, like most other prices in the high-pressure Canadian economy, continued to creep upward last week. For the sixth time in 15 months, the Bank of Canada raised its rate on loans to chartered banks. The country's basic interest rate was increased from 3¼% to 3½%,* the highest ever charged by the government-owned central bank.

Past increases in the Bank of Canada interest rate were imposed to tighten the money supply and curb inflation. The latest increase, while it will have some anti-inflationary effect, was applied primarily for another reason: to get the government out of an embarrassing...

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