As expected in financial circles, the Bank of Canada confirms this morning that it is raising its key interest rate by another quarter of a percentage point, or 0.25%, to bring it to 5%, the highest level since spring 2001.
Last month, the central bank raised its key rate by a quarter point to 4.75%.
Since then, the Bank of Canada has carefully monitored what is happening in the labor market. She has previously warned that wage growth “was holding above rates that would allow the 2% inflation target to be met without substantial increases in productivity”.
Furthermore, price growth has slowed since last year. In May, the inflation rate rose to 3.4%, a sharp drop from the peak of 8.1% reached last summer. But much of this decline was attributable to lower energy prices, as prices in other sectors of the economy continued to climb.
