As expected, the Bank of Canada raised its key interest rate by a
quarter of a percentage point on Wednesday, bringing it to 5 percent.

That’s the highest it’s been since March of 2001.

Forecasters were widely expecting the hike of 25 basis points as the economy continues to run hotter than expected.

The central bank says the rate hike was prompted by elevated
demand in the economy and strong underlying inflation pressures.

And its updated economic projections suggest it will take longer to
get inflation back to the two per cent target.

Canada’s central bank now expects inflation to stall around 3-percent for the next year before steadily declining to 2-percent by mid-2025.

There has been no indication given yet whether the rate would increase again at the next announcement in September.