Canada's central bank on Wednesday increased its key lending rate by 25 basis points to 4.75 percent, as the economy surged unexpectedly and inflation remained stubbornly high.. Desjardins analyst Royce Mendes echoed that view, saying he "continues to lean towards another 25 basis point rate hike in July, which would take the policy rate up to 5.00 percent -- the highest since 2001." amc/bfm
Canada's central bank on Wednesday increased its key lending rate by 25 basis points to 4.75 percent, as the economy surged unexpectedly and inflation remained stubbornly high.
The Bank of Canada noted that despite signs of slowing economies in the rest of the world, Canadian consumption growth in the first quarter was "surprisingly strong and broad-based."
The labour market continues to be tight, it added, and the housing market, which is sensitive to interest rates, has picked up despite higher mortgage rates.
Based on a review of the latest economic data, the bank said its governing council "decided to increase the policy interest rate, reflecting our view that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to (its) two percent target."
"Overall, excess demand in the economy looks to be more persistent than anticipated," it concluded.
The bank in March had become the first major central bank to pause its recent aggressive monetary policy to fight inflation. This followed several back-to-back hikes...
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