The Bank of Canada raised its key interest rate by 75 basis points on Wednesday, while warning that it would have to raise it further in the coming months to bring inflation back to its target of 2.0%.
This new increase, which was in line with the expectations of several economists, brings the overnight rate of the central bank to 3.25%.
In the text of the statement announcing its decision, the Bank of Canada noted that global inflation remained high and that the Canadian economy remained in a situation of “excess demand”.
Annual inflation in Canada was 7.6% in July. Its slowdown from the 8.1% in June was attributable to a drop in gas prices.
However, the central bank noted that its measures of core inflation, which tracks less volatile commodity prices, continued to climb and expectations for short-term inflation remained elevated.
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