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When the Bank of Canada raised its benchmark interest rate for the first time in two years earlier this month, it sent an unmistakable message to borrowers that the era of cheap money was coming to an end.

While economists expect the bank to gradually raise its rate another half-dozen times or so this year, there's a growing sense that the bank may need to start moving faster and more dramatically than anticipated to rein in inflation, which is already at its highest level in a generation.

Pricing in investments known as swaps suggests there is a good chance the bank will ratchet its rate up by half a percentage point when it meets in April, taking the benchmark rate to 1 per cent.

At central banks, caution is a virtue, so they tend to like to move up and down slowly, in 25-point increments, or a quarter of a percentage point at a time. Moving half a percentage point at a time is a sign the bank could be thinking more aggressive action is necessary.

Canadian tenants faced another year of affordability challenges as rents crept up nationally and were particularly high in Vancouver and Toronto.

The findings from Canada Mortgage and Housing Corp.'s (CMHC) annual rental market report released Friday show the average rent for a two-bedroom home in the 37 areas the federal housing agency studied increased to $1,167 last year, a three per cent rise from $1,128 in 2020 and $1,080 in 2019.

Bob Dugan, CMHC's chief economist, attributed the rise in rent to a supply and demand imbalance, and said the increase was also affected by the different speeds of recovery cities have experienced in the latest stage of the COVID-19 pandemic.

Vancouver and the Greater Toronto Area, he said, were facing the most severe affordability challenges because those cities held onto the highest average monthly rent for a two-bedroom apartment.

Vancouver rent increased 2.4 per cent to $1,824, while rent in the GTA rose 1.5 per cent to $1,666.

CBC